********YEAR END NEWSLETTER*******
LINDA ROZET, CPA, PC.
9873 W Bell Road
Sun City, AZ 85351
YEAR END NEWSLETTER
December 8, 2022
Dear valued client:
I hope you have had a wonderful and blessed year! We hope you and your families are safe and healthy!
NEW YEAR BRINGS BIG CHANGES!
You are important to us, and we want to keep you updated!
We are unfortunately not renewing our lease at our current location so we will be having a RELOCATION shortly. The noise levels of our neighbors have made for an inability to concentrate and do our work to the best of our ability. Also, with the COVID change in environment, we are becoming more of a virtual business, so we are transitioning into a smaller office. This being said, we have been unable to pick the perfect site at the time of this newsletter and are working out our alternatives. We will inform you of details as soon as we have them available. We appreciate your loyalty and patience as we work through the logistics to bring you a successful 2022 Tax Season and 2023 New Year.
We would like to pass on the most common tax law changes that may educate you and help you with decision making and tax planning.
WHAT’S NEW FOR THE 2022 TAX FILING YEAR?
For tax year 2022, there are two individual income tax rates for ARIZONA, 2.55% and 2.98%. The new flat tax of 2.5% will affect the 2023 tax year – which is filed by April 2024. If the employee does not update their old Arizona Form A-4, The employer will select 2.0% on behalf of the employee. The new default Arizona withholding rate is 2.0%
The IRS has raised the deduction for teachers and other educators, educators will be able to deduct up to $300 of out-of-pocket classroom expenses. This is the first time the annual limit has increased since the special educator expense deduction was enacted in 2002. For tax years 2002 through 2021, the limit was $250 per year. The limit will rise in $50 increments in future years based on inflation adjustments.
NEW FORM 1099K REPORTING
The Internal Revenue Service reminds taxpayers earning income from selling goods and/or providing services that they may receive Form 1099-K, Payment Card and Third-Party Network Transactions, for payment card transactions and third-party payment network transactions of more than $600 for the year. Now a single transaction exceeding $600 can trigger a 1099-K.
The standard deduction for married couples filing jointly for tax year 2022 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
Marginal 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).
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 revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
The annual exclusion for gifts increases to $16,000 for calendar year 2022, up from $15,000 for calendar year 2021
RESIDENTIAL ENERGY CREDITS
The Inflation Reduction Act of 2022 increased the Residential Clean Energy Credit to 30% and extends it until the end of 2032. This is huge news for solar customers, as the tax credit was previously at 26% for 2022 installations and scheduled to step down to 22% in 2023 before going away entirely in 2034. Better yet, Americans that installed solar in 2022 expecting a 26% credit will now be eligible for 30%. That’s an extra $1,000 in tax credit for purchasing a $25,000 solar or battery system.
The Energy efficient credit now has a $1,200 annual limit instead of the old $500 lifetime limit.
The Inflation Reduction Act extends the Clean Vehicle Credit until the end of 2032 and creates new credits for previously-owned clean vehicles and qualified commercial clean vehicles. Tax credits include up to:
- $7,500 for the purchase of new qualified commercial clean vehicles;
- $40,000 for vehicles over 14,000 pounds; and
- the lesser of 30 percent of the price of used electric vehicles or $4,000.
Limitations apply based on the manufacturer’s suggested retail price of the vehicle. There are also limitations for the new vehicle credit based on adjusted gross income (AGI) thresholds – for single or married filing separately taxpayers, the limit is $150,000; for taxpayers filing as head of household, the limit is $225,000; and for married filing jointly, or surviving spouse taxpayers, the limit is $300,000. Reduced AGI limitations apply to the used vehicle credit.
Starting in 2024, the Inflation Reduction Act establishes a mechanism that will allow car buyers to transfer the credit to dealers at the point of sale so that it can directly reduce the purchase price.
EARNED INCOME CREDIT
Qualifying Age limits from 2021 for EARNED INCOME CREDIT started at age 19. This has changed for Tax Year 2022. The range to qualify is between 25 -65 years again.
CHILD TAX CREDIT DECREASED back down to $2,000
$300 SINGLE AND $600 MARRIED FILING JOINT, ABOVE THE LINE CHARITY DEDUCTIONS HAVE BEEN ELIMINATED.
THE IRS SOLAR TAX CREDIT HAS BEEN INCREASED back TO 30% FROM PREVIOUS 26% LAST YEAR.
IRA CONTRIBUTION LIMITS have increased to $6,500 WITH $1,000 EXTRA ALLOWED FOR OVER AGE 50
THE IRS PIN PROGRAM IS BEING OFFERED TO ANYONE WHO WOULD LIKE TO APPLY FOR A NUMBER. THIS IS USED TO VERIFY THE IDENTITY OF THE PERSON ACTUALLY FILING THE TAX RETURN. AVAILABLE MID JANUARY
THOSE THAT RECEIVED PPP LOAN ASSISTANCE-NEED TO FILE FOR FORGIVENESS FOR QUALIFIED EXPENSES AND REMINDER THAT EXPENSES PAID WITH PPP FUNDS ARE DEDUCTIBLE, WHILE THE PROCEEDS RECEIVED FROM THE LOAN IS NOT TAXABLE.
EMPLOYER RETENTION CREDITS
THERE IS STILL TIME TO APPLY FOR THE EMPLOYER RETENTION TAX CREDITS. YOU CAN QUALIFY EVEN IF YOU RECEIVED PPP ASSISTANCE. THIS CAN BE A GREAT BENEFIT AND COMMONLY OVERLOOKED FOR EMPLOYERS.
BUSINESS MEALS ARE STILL 100% DEDUCTIBLE FOR TAX YEAR 2022.
IRS MILEAGE RATE CHANGED MID YEAR 2022 (SEE BUSINESS YEAR END REMINDERS )
I’d also like to encourage you to explore the various resources that are available on our office website. Our website has increased use in our quest to accommodate more clients virtually.
Pages will continue to be updated as the tax season approaches.
” FINANCIAL CALCULATORS” are available on the website (tools for savings calculations, retirement contributions, payroll deductions, budgeting tools, credit score analysis and Earned Income Credit calculations).
Credit/Debit card payments are continued to be accepted through a payment option on the Home Page, in addition to, of course, in-office and phone payments.
Tax Organizers for new clients as well as some common requested forms are available.
You may find some very useful information on the FAQ page and you may enjoy reading client comments on the TESTIMONIAL page.
If you have had a good experience with us, we would very much appreciate receiving a GOOGLE REVIEW or a CLIENT TESTIMONIAL for the website.
Another feature offered on the website is a file sharing program called “MY FIRM FILES”. This is available for anyone needing to submit sensitive data that is too large for regular email or for anyone that prefers the extra security of the encryption process. Please contact us to be issued a password.
PLEASE REFRAIN FROM VISITING THE OFFICE IF YOU HAVE HAD ANY RESPIRATORY SYMPTOMS IN THE LAST 7 DAYS. OUR OFFICE TEAM IS PRACTICING THE SAME PROTOCOL. YOUR APPOINTMENT CAN ALWAYS BE RESCHEDULED.
We continue to offer evening, as well as Saturday tax appointments. A lot of clients have been very receptive to this extra availability.
To continue to do our part at helping keep our community safe and healthy, we recently now offer a much larger variety of options for your tax appointment. We will have designated days of the week that offer remote scheduling options and we will keep with the traditional face/face interview appointments on certain days of the week.
We have implemented a Project Management System , so we can more efficiently keep track of work in progress and better communicate the status of work projects. It has been up and running for about a year now and should bring much more efficiency to our team.
Our office now also offers business texting so we are excited about this new option, especially for things such as appointment reminders.
I’m happy to announce you will be seeing several of the same faces and voices this year. We currently have the strongest team we’ve ever had and we continue to grow and help as many as we can at a very reasonable price.
I’d like to reintroduce our team along with their specialties:
Linda Rozet, CPA-Corporate Taxes, Complex Individual taxes, Consults, Tax Planning
Carole Owens-Personal Taxes, IRS issues, General Office
Ida Torres-Admin Support, Scheduling, AZ Dept of Revenue Reporting, Special Projects
Ellen Eklund-Bookkeeping, Payroll, Taxes
Nicole Rozet-Scheduling, Admin Support, Bookkeeping
SENSITIVE STAFF NEWS
I do need to reemphasis TURNAROUND TIMES as this continues to be one of the main issues of concern that is a challenge.
The tax season is a very demanding time and there is increasing new regulation that entails a tremendous amount of important work to be handled within a very short time. Therefore, if you can keep this in mind and please be patient in waiting for responses it would be of utmost appreciation. We understand the tendency is to be anxious while waiting upon tax results. We simply just ask for you to please be patient as we do the best professional job we can. Keep in mind, sometimes this can entail additional time and judgment.
We will gladly give you an ESTIMATED turnaround time at the time of your tax appointment.
We are generally engaged to prepare the most accurate tax returns we can, achieving the best tax results while following all applicable laws. Keep in mind we are NOT engaged to have your tax return rushed as that may very well jeopardize one of the other principles we are required to follow…. integrity, objectivity, competency, accuracy, ethics.
It is our professional policy to generally not prepare tax returns while clients wait and not to release tax results until your pickup appointment or until your package arrives in the mail. I realize there will be some limited circumstances when this information is needed in advance, such as the decision to apply refunds to the following tax year. That can be considered an exception to the policy.
If we can all work together on these requests and policies, it will make for a much smoother tax season. Many thanks on this in advance!
IRS allows E-filing for the most three recent tax years.
Amended tax returns are now eligible to be E-filed
Again, we’d like to emphasize that we offer tax appointments through ZOOM, OR PHONE for anyone who is interested. This may be a great option for those of you who have relocated, who aren’t feeling well or would like to refrain from coming into the office in person.
The IRS is continuing to concentrate their efforts in community outreach in the areas of rental property owners and small business clients. If this applies to you, please remember to keep good records of all income and business expenses as this paperwork is required to support any potential deductions claimed on your return.
It is very important to keep an accurate mileage log to support your business use of a vehicle. Just as important is proper documentation of any business meals/entertainment and per diem or travel allowances. Please be prepared to submit this documentation during tax preparation. I am always available to offer advice in any of these technical areas.
IRS has not announced their opening date as of yet. Stay tuned for further information.
Deadline to file the 2022 Tax Returns is scheduled for April 18th this year.
We hope to be hearing from you soon in regards to the preparation of your tax returns. As always, your continued business is greatly appreciated! We have opened the calendar for tax appointments at this point so you can schedule whenever you are ready. Feel free to email or call with a request for a specific day and/or time for your appointment and we will try our best to accommodate that. As a reminder, evening and weekend appointments are offered. Once again, this year we will be using income tax organizers and would appreciate them being filled out as best as you can to help recap the accuracy of your return details, (especially anyone with a small business.) Even though it may not seem needed from your perspective, they are a very helpful tool as I may only talk to many of you once a year.
As another reminder, once again this year, I am requesting that we place any large special projects and prior year tax returns on hold during the Jan-April time frame unless it is extremely urgent. If you are behind in your bookkeeping or income tax filings, please contact me and make special arrangements to handle your needs. Due to the demands of the tax season, I regret that as a general rule, we do not have the resources to work on special projects or prior year tax returns during this time frame. I feel this is only fair as a courtesy to all clients trying to meet the regular income tax filing deadlines.
The options for tax preparation again this year are your own personal choice. While some feel that certain tax issues are best handled and discussed in person, others prefer submitting data electronically if your tax situation is similar to last year and if there isn’t much that warrants a new discussion.
Income tax paperwork can always be mailed, emailed, faxed, dropped in the drop box or delivered to me by a courier service.
YEAR END AND YEAR-ROUND REMINDERS
The following list is a summary of what I feel are important tasks to review before year end. A lot of these I feel are worth repeating, as many of these are frequently overlooked by many businesses and individuals each year.
- Mail your January mortgage payment early enough to be posted this year if you are needing deductions or HOLD your January mortgage payment to defer deductions if your itemized deductions are LIMITED this year
· Make donations this year of any unused household items
· Take advantage of the AZ School Tax Credits http://www.azdor.gov/TaxCredits.aspx
- Take advantage of the AZ Charities that provide assistance for the Working Poor Tax Credit http://www.azdor.gov/TaxCredits/QualifyingCharitableOrganizations.aspx
- Request a personal tax projection from us if you have had an issue with under-withheld taxes in the past. (The tax planning charge would be quite justified if it helps you in managing your financial affairs and eliminates year end surprises)
· Make HSA, Educational and Individual IRA contributions
· Keep better track of charity, medical and business mileage for the self-employed
- Sign up for employer flexible spending accounts (Section 125 plans) and retirement benefits (dependent care, medical, 401K)
· Make sure to use all the funds left in your flexible spending accounts
- Make 4th quarter estimated income tax payments (AZ deduction counts this year if mailed during December)
- Consider selling losing securities to benefit from the allowable capital loss deduction and to net losses against gains in the same year
· Install qualified energy efficient home improvements or solar equipment
· Submit all charity deductions, even if you are NOT itemizing your deductions
- Consider requesting employer reimbursement now for employee expenses as they are no longer deductible on your personal income taxes
· Remember that travel expenses are now deductible as eligible gambling losses
· Consider shifting income to others that may be in a lower tax bracket
· Consider a ROTH conversion to utilize the wider new income tax brackets
- Consider taking advantage of the ZERO Capital Gains rate by utilizing in full the lowest tax bracket
- Take your RMD
- Upgrade your QuickBooks if you are a 2020 user. File your corporate and partnership income taxes on time! There are now steep penalties assessed for non-filing of your income taxes.
- Our team is now filing Sales Tax Reports through AZTAXES.GOV as AZ has moved most businesses to an on-line filing requirement. In most cases, we can no longer file paper reports.
- Corporations: Generate your annual meeting minutes and any bylaw changes. IMPORTANT: All Corporations are required to have stock registers/certificates, minutes and bylaws! If you do not have these on file, contact me for a referral source.
- Corporations: File your Arizona Corporation Commission reports on a timely basis. You can sign up for e-mail reminders through their website.
· Accelerate any foreseen equipment, auto and supply purchases into this year
· Consider taking advantage of the Section 179 deduction for vehicle purchases
· Make SEP contributions
· Log in cash expenses for the year
· Document business miles traveled on your mileage logs (see me for a sample)
· Keep better track of expenses for home utilities for businesses operating from home
- Claim up to a maximum of $25 for any valid business gifts given to individuals or businesses
· Delay billing customers in December to defer revenue into January, if possible
· For cash basis businesses, pay all outstanding bills if cash flow allows
· Remember that credit card purchases are deductible in the year the items are purchased
- Make sure you are in compliance with the State Fund mandatory coverage requirements for contractors that do work for you.
- REMINDER: Workers Compensation Insurance is mandatory for all employees with owner/officers being the exception to the rule.
- File payroll and sales tax reports timely and become knowledgeable as to your filing deadlines
- Turn otherwise hobby expenses into legitimate business deductions by converting into and setting up a sole proprietorship
- Review the possibility of claiming a home office deduction under the fairly new SIMPLIFIED METHOD
- REMINDER: Arizona requires all businesses to provide paid sick time for all employees. The minimum is 1 hour of sick time per 30 hours worked.
· Calculate any payroll bonuses or shareholder loan payments
· Sole proprietors-pay children for services rendered to shift income to a lower tax bracket
- Order a current tax table if you are a QuickBooks payroll user (not required if I enter your payroll for you)
- Report new employees to the New Hire Reporting Division (mandatory through the year) THIS HAS BEEN OVERLOOKED BY MANY BUSINESSES.
- Obtain current addresses and taxpayer identification numbers for any 1099 subcontractors, employees and previous employees (for 2022) and enter these into QuickBooks
· Reimburse employee business mileage at .585/mile for Jan-June & .625/mile for July- Dec
· Check your files to make sure that valid I-9, W4 and A4 forms exist for every employee
- Make sure you are aware of your required tax deposit and quarterly report deadlines. I have seen excessive penalties again this year relating to late reports that could have been easily avoided. Contact me for a payroll chart if it would be helpful. It definitely helps to make sure you understand the specific payroll filing requirements for your business. I’d love to see these reduced or completely eliminated for next year.
· Consider setting up a small business profit/sharing or retirement plan.
· Consider setting up an HSA (Health Savings Account) for employees.
· Re-evaluate the best business structure for your company under the new Tax Reform Act
· Continued 20% QBI deduction for small businesses
Hopefully, I have suggested some items that can be of assistance to you or your business and can possibly help save some money. If you have any questions or comments, don’t hesitate to call.
Lastly, you will periodically be hearing from me throughout tax season as I receive any important tax updates!
Thank you all for your continued support and ongoing trust and business!
Hope to see or hear from you soon ……….
Warmest Regards and Happy Holidays, J
Linda & Team
LINDA ROZET, CPA, PC