Tax lawyers in San Jose, and other experts, have determined that a larger tax bill or a smaller refund will likely be on the horizon for taxpayers in 2023. For this reason, as the year ends, it’s important for filers to understand the new laws or google “tax attorneys near me” if they are unclear about what the reduced tax breaks mean for them. Below are some of the most significant changes regarding tax laws:
Reduction in Specific Tax Credits
Filers may find themselves with reduced refunds due to tax credits being lowered for 2022 under the new guidelines. Cecil Staton, president and wealth advisor of Arch Financial Planning, explained that the tax credits that were boosted during the American Rescue Plan Act of 2021 were not extended into the new year. Most California tax attorneys agree that this could lead to a significant number of filers seeing less money in their pockets.
Formerly, the child tax credit provided as much as $3,600 in the form of a deduction for children under the age of 6. For children ages 6 to 17, the deduction amount could be as high as $3,000. For 2022, however, these amounts revert to what they were previously, which was $2,000 for children under the age of 17. The child and dependent-care tax credit was also reduced by approximately $3,000 to $6,000.
Third-Party Payment Reporting Now in Effect
An Internal Revenue Service tax attorney would confirm that 1099-K forms will now be issued by third-party payment platforms such as PayPal, Venmo, and Stripe for anyone receiving even a nominal $600 payment, which is the new threshold. Formerly, it was $20,000, which means that just one transaction can trigger the form.
Such payment methods are commonly used to pay part-time workers or people doing side jobs, or to receive payments for goods or services online or in person.
The IRS claims that filers will not receive 1099-K forms for personal transfers, but most experts claim that this could very well happen, and adjustments may need to be made to the person’s return by an accountant or tax preparer.
Claiming Charitable Deductions Is Now More Difficult for Many Filers
Tax refunds may also be lower in 2023 because claiming charitable deductions for 2022 will be more difficult than previously. Blue Ocean Global Wealth’s CEO, Marguerita M. Cheng, stated that itemized deductions must be present on filers’ returns if they are to receive charitable tax breaks. This can be a problem for some individuals, since many people do not itemize.
In 2021, Congress gave charities a bit of a break by making it possible to claim deductions for cash donations. The guidelines were $600 for married couples filing together and $300 for a single filer. This break was given regardless of whether or not the filers itemized their returns.
Now, if someone wants to use the EZ form, charitable contributions cannot be claimed. This may affect certain filers, since 90 percent of taxpayers used the standard deduction in 2019 rather than itemizing.
It’s wise to seek professional advice, whether one is filing back taxes or simply trying to navigate the new tax guidelines. Tax lawyers in San Jose are the best individuals to offer advice and guidance with regard to any income-tax related question or problem. Don’t just ask Alexa for a tax attorney near me, look for a one with great reviews on Yelp and Google, where you’ll find TaxHelpers.com as well.