Welcome to another tax season! We hope you enjoyed your holidays. The IRS announced that the 2022 tax season will start on Monday, January 24. The IRS will begin accepting paper and electronic tax returns that day. The filing deadline to submit your 2021 tax returns or an extension to file and pay tax owed is Monday, April 18, for most taxpayers. Here are what you need to know for tax season 2022 and looking ahead to 2023.
Economic Impact Payments (EIP)
The EIP you received is not taxable for federal income tax purpose; however, it will reduce your recovery rebate credit. Therefore, you will receive IRS Letter 6475 for the payment detailing the amount you've received and use that to reconcile the amount you are due on your return.
Enhanced Child Care Credit
The child tax credit has been enhanced for 2021. It has extended to qualifying children under age 18 depending on your modified adjusted gross income. If you received advance child tax credit payments during 2021, you will receive IRS Letter 6419. You will need to use the information on this notice to figure the amount of child tax credit to claim on your 2021 tax return.
Virtual Currency
Like last year, the IRS has continued its focus on virtual currency tax compliance. If you engaged in a transaction involving virtual currency, you will need to file and answer the question on Form 1040 (or 1040_SR). If any of the transaction that you invest in on a foreign exchange, you must also report the assets on the related foreign reporting forms.
Long-Term Capital Gains Tax Rates
Tax rates on long-term capital gains (gains from the sale of capital assets held for at least one year) and qualified dividends did not change for 2021. However, the income thresholds to qualify for the various rates were adjusted for inflation.
Student Loan Relief
Normally, if a student loan is canceled, forgiven, or otherwise discharged for less than the amount you owe, the amount of canceled debt is considered taxable income. However, starting in 2021, this rule is suspended for most canceled student loan debt that was incurred for a post-secondary education. The change is only temporary, though. In 2026, forgiven student loan debt will once again be taxed.
Form 1099-K
The new tax rule, effective January 1, 2022, lowers the threshold for reportable 1099-K income from $20,000 (and 200 transactions) to $600 solely. You are required to report any income $600 or more in total from online business when you receive Form 1099-K (ex. from eBay, Venmo, PayPal, YouTube, Amazon, etc.).
Tax “Extenders”
Several "tax extender" deductions and credits were originally set to expire after 2020 and now extended until the end of 2021 include:
- Mortgage insurance premiums deduction
- Nonbusiness energy property credit for certain energy-saving improvements to your home (e.g., new energy-efficient windows and skylights, exterior doors, roofs, insulation, heating and air conditioning systems, water heaters, etc.)
- Fuel cell motor vehicle credit
- Alternative fuel vehicle refueling property credit
- Two-wheeled plug-in electric vehicle credit, and
- More
Thank you for choosing Sharon Huang CPA to assist with your tax preparation and filings. We look forward to working with you again.
