Improving lives through sound financial planning.
Are You Ready for Tax Prep Season?

Are You Ready for Tax Prep Season?

by Drew Overton | February 3, 2023 | Financial Planning, Tax Planning

With 2022 in the rearview, it’s tax-filing season. Below you’ll find an overview of changes in tax law for 2022 as well as a brief checklist of documents to gather when preparing to file. 

The first thing you should know is that the due date for your 2022 Form 1040 is April 18, 2023, instead of April 15. An extension until October 16, 2023, is also available. Filing for an extension does not extend the time you have to pay your 2022 taxes. Thus, interest and penalties may apply if you don’t pay any balance due by the un-extended due date of the return. 

What’s New for 2022 Tax Returns

  • For 2022, the standard deduction amount has been increased for all filers. The amounts are: (1) $12,950 (Single or Married Filing Separately); (2) $25,900 (Married Filing Jointly or Qualifying Widow(er); and (3) $19,400 (Head of Household).
  • The deduction limits for traditional IRA contributions as well as the contributions limits for Roth IRAs have both increased for 2022, depending on your filing status and modified adjusted gross income. Click here to view the 2022 IRA deduction limits or click here to see the Roth IRA contribution limits.
  • There were no stimulus payments paid in 2022. You should not expect to receive an additional payment in your tax refund. 
  • Above-the-line charitable deductions are no longer allowed. During COVID, taxpayers could deduct up to $600 of their charitable gifts when taking the standard deduction. This is no longer the case for 2022 tax returns. 
  • If you are eligible to receive the full Child Tax Credit, you will receive $2,000 for the 2022 tax year instead of $3,600 (2021 only). 
  • The Child and Dependent Care Credit has dropped down to $2,100 (2022) instead of the 2021 level of $8,000. 
  • For the Earned Income Tax Credit, if you received the full amount in 2021 ($1,500), the amount is reduced to $560 for your 2022 tax return. 

Items Needed to Prepare Your 2022 Tax Return

All information that you provide to your tax preparer should, to the best of your knowledge and belief, be accurate and complete. Be sure to keep all documents, records, and other evidence to substantiate all of the entries on your returns. We recommend that you keep these documents for your records. Also keep records pertaining to items such as home purchases/sales, refinancings, home improvements, and gifts to family members or third parties. Retaining such information will better protect you in the event of any inquiry by the IRS or state tax department.

When gathering information for your tax preparer – whether you use a CPA or a tax prep software – review the list below for a general guideline of what may be needed. 

  • Prior Year Returns: A copy of your federal and state income tax returns from last year, including any amended returns, together with a copy of any correspondence you have received in relation to them from the IRS or a state taxing authority.
  • Estimated Tax Payments: The amount of any estimated tax payments (federal and state) made for tax year 2022 (including a 2022 fourth quarter state estimated payment made by December 31, 2022) and any amounts for prior years’ state taxes paid in 2022, including any balance due for 2021 paid in 2022.
  • Dependents: The name of any dependents you intend to include on your return, their SSN, their birthdate, and their relationship to you. 

Your tax preparer will also need records of any of the following categories of income and expenses incurred by you and/or your spouse during 2022:

  • Wages, Interest, Dividends and Other Miscellaneous Income: Any W-2s or Forms 1099, together with records of any other compensation received during the year. Details as to any investment property, including stocks, bonds, virtual currency, and real estate, you sold during the year. Most financial institutions send out 1099s by mid-February. 
  • K-1, K-2, K-3 Forms: Any Schedule K-1s, K-2s, K-3s you received from partnerships, S corporations, LLCs, LLPs estates or trusts of which you are an investor or beneficiary.
  • Business Income and Expenses: Business income and expenses from any unincorporated business (sole proprietorship) or single-member LLC you operated during the year. This may include businesses for which you received a Form 1099 or a Schedule K-1, K-2 and/or K-3.
  • Other Income Items: Details as to any other sources of income, such as income from rents, royalties, trusts and estates, farming, unemployment compensation, social security benefits, and any other income received during the year. 
  • Retirement Plan Contributions and Distributions: The date and amount of contributions made to an Individual Retirement Account (IRA), Roth IRA, Simplified Employee Pension (SEP), etc. 
  • Alimony and Child Support: Generally, for divorce or separation instruments executed before 2019, alimony payments are included in the gross income of the recipient and are deductible by the payor. 
  • Medical Expenses: If you had significant medical, dental or medication expenses not reimbursed by your health insurance, you may want to provide information about such expenses. Also include any amounts you paid for health and long-term care premiums. 
  • Health Insurance: If you, your spouse, or a dependent had health coverage in 2022, the provider of that coverage is required to send a Form 1095-A, Form 1095-B, or Form 1095-C listing the individuals in your family who were enrolled in the coverage and showing their months of coverage. 
  • Taxes: In addition to taxes withheld and already reflected on your W-2s and Forms 1099, you may want to include documentation on other taxes you paid during the year, including federal and state income tax, self-employment tax, real property tax, sales tax and personal property tax. 
  • Mortgage Interest on Personal Residence and Other Home(s): Please provide the amount of interest you paid during the year on any mortgage or home equity loan as well as the statement (Form 1098) furnished by your mortgage interest lender(s). 
  • Charitable Contributions: The amount of any gifts to religious organizations or other charities, in cash or property, the names of such charitable organizations, and any contribution receipts. 
  • Tax Credits: Information and documentation that may allow you to claim certain refundable and non-refundable tax credits such as the child tax credit, education credits, the earned income tax credit, the recovery rebate credit and certain energy-efficiency related credits, etc. 

We hope this overview was helpful as you prepare to file your 2022 tax return. If you have any questions regarding the information above, or if you would like to discuss our financial planning solutions, give our office a call at (757) 436-1122. 

Reproduced with permission from Bloomberg Tax & Accounting. Published 2021. Copyright 2021 by The Bureau of National Affairs, Inc. (800-372-1033) ¶3820.100. Client Letter — 2021 Tax Year Individual Return Preparation (Form 1040)

Some information in this blog post comes from the IRS website: