What to Know When Filing Your 2022 Tax Return: New IRS Rules & Expiring Policies

Tax season is here, and as usual, people scrambling to prepare returns by the April 18th IRS deadline will likely have a raft of questions stemming from new rules and policy changes for 2023. According to the tax Experts on JustAnswer, which facilitated nearly 78,000 tax-related conversations in 2022, these are the 10 areas causing the most confusion for taxpayers this year: 

1 – Venmo/Paypal income – what’s taxable and how do I report it? How do I handle business vs. family and friend transactions? These are just a few of the questions JustAnswer Tax Expert Roxanne Hendrix is seeing often this year.    

2 – Changes in Covid-era tax breaks – Hendrix reports that people are unsure what’s new and changed or expired from the pandemic-enacted Child Care Credit and Earned Income Credit, with many asking “how much am I still eligible for and what’s changed?”  

3 – Crypto – Is the IRS requiring all crypto transactions to be reported on the 1099 form now? And how do I deduct losses from Ponzi schemes related to cryptocurrency? These are common questions stemming from the cryptocurrency craze and associated scams perpetrated last year according to JustAnswer Tax Expert Alex Oware. 

4 – EV Tax Credits – Hendrix points out that with the increasing popularity of electric vehicles (EVs), she’s seeing more questions such as, “what are the new EV rules and what am I eligible for?” and “Which cars are now eligible for the EV credit?”  

5 – Tax Bracket Updates in 2022 – Updated tax brackets going into effect for 2022 have more people asking “what is my current bracket?” and “ What has changed?” according to Hendrix. 

6 – 401k Withdrawal and Rollovers – According to JustAnswer expert Jeffrey Jackson, CPA, “I would think clients will ask about having to pay taxes on withdrawals from their 401k. Especially those who have experienced a natural disaster.” Jackson also said he expects questions about “how to claim a rollover contribution on their return, and about the annual limit for contributions to IRA and 401k.” Jackson also said people are increasingly asking if they can contribute to an IRA if they already have a 401k, or if they can contribute to their own IRA if their spouse has a 401k. 

7 – Taxes on Capital Losses – “2022 was a challenging year for investors, retirees and the stock market as a whole,” explains JustAnswer expert Alex Oware, CPA. “Because of inflation and probable fear of impending recession, a lot of taxpayers saw their investment reduced by an average of 40% or more. Some taxpayers panicked in the process and decided to sell their stock holding at a loss.” Oware said he expects a raft of questions such as “Can you use capital losses to offset other income?” or “Can I just deduct all my capital losses?” or even “I have lost 50% of my investment in the stock market, can I deduct them even before I sell them?” 

8 – First-time Homebuyers Tax Credit – As of January 17th, this Bill had not yet been passed.  However, when the Bill does pass (if it passes), it may be retroactive for TY 2022, since this is when the Bill was put on the table. According to JustAnswer Tax Expert Angela Anderson, “Eligible first-time home buyers would receive a refundable tax credit equal to 10% of the property’s purchase price.” The credit amounts would max out at:

• $15,000 for homes bought in 2021
• $15,300 for 2022
• $15,606 for 2023
• $15,918 for 2024
• $16,236 for 2025
   

9. Home Office Expenses – While there haven’t been any notable changes in the IRS rules about deducting home office expenses since last year, there are still lingering questions among taxpayers on this issue since so many people now work at least part of the time from home. That’s why Hendrix says she continues to get questions about which if any homee office expenses are deductible? 

10. Deductions for Charitable Donations – Which and how much of my charitable donations can I deduct and do I need to itemize is a popular question on JustAnswer this year given some of the 2023 changes (see below). 

Key Changes for 2023 Impacting Your 2022 Return 

Deductible Mileage – According to JustAnswer expert Moira Corcoran, CPA, “The IRS changed the mileage rates in the middle of 2022 to the following: 

1/1/22-6/30/22: 

• Business $0.58.5
• Medical/Moving $0.18
• Charitable $0.14
   

7/1/22-12/31/22: 

• Business $0.62.5
• Medical/Moving $0.22
• Charitable $0.14

Charitable Donations –  For 2022 and beyond, the only way to write off charitable donations is to itemize your deductions. This is a change from the policy in place over the past two years in 2020 and 2021 that allowed taxpayers taking the standard deduction on their tax return to also claim a tax deduction of up to $300 for cash donations to charity ($600 for married couples filing jointly). However, the $300 deduction for those taking the standard deduction wasn’t extended past 2021. 

Marginal Tax Rates – For tax year 2022, the top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly).

The other rates are:

• 35%, for incomes over $215,950 ($431,900 for married couples filing jointly);
• 32% for incomes over $170,050 ($340,100 for married couples filing jointly);
• 24% for incomes over $89,075 ($178,150 for married couples filing jointly);
• 22% for incomes over $41,775 ($83,550 for married couples filing jointly);
• 12% for incomes over $10,275 ($20,550 for married couples filing jointly).
• The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly).

Reduced Childcare Tax Credit – Those who got $3,600 per dependent in 2021 for the Childcare Tax Credit will, if eligible, get $2,000 for the 2022 tax year. 

Changes in the Earned Income Tax Credit – Eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 in 2022. The tax year 2022 maximum Earned Income Tax Credit amount is $6,935 for qualifying taxpayers who have three or more qualifying children, up from $6,728 for tax year 2021. 

The Child and Dependent Care Credit Reduction – The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021. According to JustAnswer expert Jeffrey Jackson, CPA, “Taxpayers should keep in mind that there will not be further increases in child credits. Families should budget accordingly to make sure they account for the decrease in tax refunds.” 

Rise in the Standard Deductions –  For married couples filing jointly for tax year 2022, the standard deduction rises to $25,900 up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for tax year 2022, up $600

Phasing out of The Alternative Minimum Tax exemption – The amount of the Alternative Minimum Tax exemption for tax year 2022 is $75,900 and begins to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption begins to phase out at $1,079,800). The 2021 exemption amount was $73,600 and began to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption began to phase out at $1,047,200).

For help understanding any of these changes as you tackle your 2022 tax return, JustAnswer Tax experts are here to help online, anytime from anywhere. Just visit https://www.justanswer.com/sip/tax.