Haven't Finished 2022 Taxes?: 6 Things to Consider
The closer you get to that April 18 deadline, the harder it will be to get help if you need it.
Putting off income tax preparation because you’re unsure of some issues? Here are some common areas of confusion.
“There’s plenty of time left!”, you tell yourself. “I have several more weeks to file my income taxes. I’ll call my CPA at tax time.”
Yes, that’s true. But there’s a problem with that line of thinking! The closer you get to that infamous April deadline, the harder it will be to get help if you need it. The IRS phone lines will have ridiculous wait times. Your CPAs and tax professionals will be overwhelmed, overworked, and overbooked with the all folks who started earlier than you. You could try tax software, but that gets expensive closer to the filing deadline, and you still may not get your questions answered.
Now is the time to deal with those tax topics that are stumping you before you have to give up and file an extension. We’ll cover a few of the most frequently asked questions here. As always, there are often additional rules and exceptions to these topics so your own due diligence is still required.
Who is considered a Dependent?
A son or daughter who lives with you who is younger than 19 years old is probably the most common situation. You can also claim children who are students up to the age of 24. No age limit applies if the individual is "permanently and totally disabled."
But other people can be dependents, like relatives (aunt or uncle, parent or grandparent, grandchild, half-brother, niece, etc.). You can also claim someone who is not related to you as long as they meet a number of requirements.
The IRS’ definition of “dependent” is broader than you probably think.
Can I take the home office deduction?
Many people asked this question the year COVID began because their employers required them to work from home. Unfortunately, the answer is No. If you are self-employed, though, you may be eligible. But you’ll be required to provide a lot of information about your home and the percentage of it you use for business. It must be your principal place of business, and it must be used regularly and exclusively for your business. The IRS provides a simplified version that you may want to use.
Do I have to include a 1099-K on my tax return if I have a side gig?
It depends. Whether you’re a rideshare driver or a marketplace seller (eBay, Etsy, etc.) or you’re otherwise self-employed part time and being paid through a third-party payment processor like PayPal, you should receive a 1099-K if you made over $20,000. Congress had been considering reducing this threshold to $600, but it’s been delayed for at least a year.
I got a larger Child Tax Credit (CTC) in 2021. Will I get the same for 2022?
No. The CTC has reverted to pre-COVID levels, which is up to $2,000 for every child under the age of 17. The Child and Dependent Care Tax Credit has also been reduced to 2020 levels. Its maximum is now $3,000 (one dependent) and $6,000 (two or more).
I bought an electric car in 2022. Can I get a tax credit?
You may be eligible for up to a $7,500 tax credit if you meet certain requirements.
You’ll need to file a Form 8936 to claim the Qualified Plug-In Electric Drive Motor Vehicle Credit.
I provide technical services to computer owners part-time, and they pay with cash or checks. Where do I report that income?
You’ll have to complete an IRS Schedule C Profit or Loss From Business, where you’ll enter the total of your gross receipts. This is a complicated form that asks many question about your business. You’ll be able to report your income here, as well as any expenses (adverting, office supplies, repairs and maintenance, etc.) that offset that income. The IRS allows you to claim any expenses that are ordinary and necessary for your trade or business. As always, there’s a lot of gray area there.
Year Round Is Best
The best way to ease the frustration and anxiety over income taxes is to plan all year for them. If you’re getting any income from self-employment, keep accurate, thorough paper records (save all receipts!) or use a personal finance or small business accounting application that helps you track income and expenses. Estimate and pay your quarterly taxes so you don’t get hit with a big bill at filing time.
Better yet….Pathway CPA Group provides year-round services to small-business owners and real estate investors through our Tax Management Services or Tax Management + Bookkeeping Services. Ready to see if our services are a match for your business or investing needs? Reach out to us by taking the First Step toward a stress-reduced tax season.
