Taxing Times: New IRS Tax Code Changes for 2022

It’s no secret that lying on your tax return can get you into a boatload of personal financial trouble. The only worse situation would be not filing a tax return at all after you’ve made considerable money over the course of a year or years. In fact, if the IRS discovers you’re cheating on your taxes, it’s possible for them to freeze up your bank accounts with a levy notice.

Should that happen, you will need to hire a reputable service who can communicate directly with the IRS on your behalf and in the end, produce an IRS levy release for you.

But then there are people who make an effort to pay their taxes, but have no idea about tax law or the changes to the tax code that have occurred that can affect how much they either owe or are due as a refund. These are the people who need to be educated on new IRS tax code changes, even if they are consulting with a professional accountant.

According to a new Labor Department report, the IRS recently announced new changes to the tax code for upcoming 2022 tax year. The changes will not affect your 2021 taxes, but they will most certainly have a direct affect on the 2022 federal tax returns you will be filing in 2023. These changes come about just as inflation has hit a new 40-year high and consumer prices, especially at the gas pump, continue to skyrocket.

The IRS announced changes to the tax code on Wednesday for the upcoming 2022 tax year. The changes apply to 2022 federal tax returns that taxpayers will file in 2023 and come as inflation hit a more than 30-year high in October as consumer prices continue to surge, according to a Labor Department report released Wednesday.

You should expect income tax brackets to rise since they must be adjusted for inflation. That means the standard deduction will also rise. The majority of taxpayers claim a standard deduction or so states the experts.

Says one California CPA, between the increase in the standard deduction along with the adjustment for inflation, you might realize a slight tax cut. However, that tax cut will easily be eaten up by rising prices.

But you should know that the new tax code changes will most definitely have an affect on your bottom line. It all depends on how you file your taxes which means you need to be educated to the following changes coming in 2022.

Increase in the Standard Deduction

The standard deduction is said to be a “static deduction” that anyone can claim on their federal taxes. This deduction will be increasing in the 2022 federal income tax filing year. Here are some specific numbers as issued by the IRS:

Married couples filing jointly: the standard deduction increases to $25,900. This is an $800 increase.

Single taxpayers and married person who file separately: the standard deduction increases to $12,950. This is a $400increase.

Heads of households: the standard deduction increases to $19,400. This is a $400 increase.

Tax Bracket Changes

According to the IRS, the tax brackets will change. Tax brackets are the range of incomes that are subject to a specific income tax rate for the year 2022. Once the standard deductions have been taken, this is how your income is going to be taxed.

10 percent: Taxed income up to $20,550

12 percent: Taxed income between $20,550 to $83,550

22 percent: Taxed income between $83,550 to $178,150

24 percent: Taxed income $178,150 and $340,100

32 percent: Taxed income between $340,100 to $431,900

35 percent: Taxed income between $431,900 to $647,850

37 percent: Taxed income over $647,850

New Tax brackets for individual taxpayers for the year 2022:

10 percent: Taxed income up to $10,275

12 percent: Taxed income between $10,275 to $41,775

22 percent: Taxed income between $41,775 to $89,075

24 percent: Taxed income between $89,075 to $170,050

32 percent: Taxed income between $170,050 to $215,950

35 percent: Taxed income between $215,950 and $539,900

37 percent: Taxed income over $539,900

No Significant Savings

You might look at some of the tax brackets and believe you will be saving on your taxes in 2022. Nothing could be further from the truth. State the experts, with prices from everything from used cars to bacon soaring and no relief in sight, the new tax code will not “equate to any significant savings.”

However, retirees with a fixed incomes might pay less income tax since “their income is static.”

Tax Write offs for Sellers

Tax season is just about to come to a close! This means that if you haven’t yet filed, now is the time to get to work before the cut off date comes around. For those who are still in the process of filing, wondering what else they may be eligible for in terms of exemptions and write offs, there is one large piece that may help you solve this puzzle. If you sold your home in 2017, then you have the opportunity to save a large sum of money this spring! Several exemptions and tax write offs for sellers exist.
Here’s how to take advantage of them.

Know what you’re eligible for

There is a major real estate tax exclusion available, and just about anyone who sold their home last year can take advantage of it to some degree. Here is a rundown:

  1. You don’t have to pay taxes on a portion of the sale of the home. This means that if you’re filing as single, then you pay taxes after the first $250,000 of the sale and, if you’re filing jointly, you pay taxes after the first $500,000. Given the fact that the median cost of a house is currently at about $200,000, this write off heavily works in favor of most Americans!
  2. You need to have lived in the home for at least some time. To receive the full benefit of this tax exemption, you must have lived in the home for at least two full years before selling it. However, if you were unable to stay the full two years due to some legitimate circumstance, like illness, unemployment, or a divorce, then you may still be eligible for a reduced exclusion. In this instance, the amount of taxes you don’t have to pay is in proportion to how long you’ve lived there. For example, if you are filing jointly and have lived in the house for a year, or one-half of two years, then you’d have to pay for half of the $500,000 worth of taxes, or after the first $250,000.
  3. You can’t used this exclusion recently. If you sold another home within the past two years and used this exclusion, then you can’t use this exclusion.

There are several tax implications of selling a house, so it’s best to familiarize yourself to them before filing this spring!

Don’t forget the with holdings!

Guess what, there’s more! If you sold your home last year, and had to spend some money in the process, then you may be able to withhold some tax dollars. Here are a few things you may be able to write off depending on your situation.

  1. Moving costs
  2. Real estate agent commission
  3. Inspections
  4. Extensive home improvement
  5. Closing

Don’t let money go to waste by neglecting to uncover all that you’re eligible for in terms of exclusions and write offs. We recommend a consultation with a tax specialist or using a tax software to help you file if you’re unsure of how to do it on your own!
Keep up to date with the latest financial news and trends by visiting Finance guest frequently! We’re always providing in-depth and relevant posts that can help answer your most pressing financial questions.

VAT and CIS Tax Return Deadline Guide

Taxes are not meant to burden the individual. The fact remains that deadlines do. With the hustle bustle of the busy lives, forgetting to pay the tax is not unusual. This is the prime reason why the Tax Deadlines seem burdensome. If you have wanted to submit VAT return, and missed the deadline, to pay the fine may seem to be the most common way of handling the problem. The problem is the step wise sequence which needs to be followed.

What is VAT?

Value Added Tax or VAT as it is commonly called is the most frequently paid tax that the government levies on the various products and services that are offered to the consumers. And for each financial year the deadlines remain fixed.

What is CIS?

CIS is also a national Tax which needs to be paid. Technology enables the methods to Pay VAT online. Even if you wish to submit CIS return, online methods are the easiest and time saving ways.

By typing in the government website, you just need to fill the details and make the payments. In fact, in this way the receipts are also printed online immediately and you can easily keep them for record keeping.

The first and the foremost step is to avoid missing the deadline altogether. Every financial year, if you have just paid the taxes, your worries are over. But there are many cases where in the deadline is missed. And there are different ways in which the extension for the Tax Deadline can be sought. The point that is to be understood here is that HMRC does allow leverage in terms of tax Deadline if missed for the first time. A Surcharge Liability Letter is issues that place you in the Surcharge period for the first twelve months after you have missed the deadline. And in case you happen to miss another deadline during this period, there are chances that the charges and fines incurred would be based on the amount that is accumulated as per the VAT payments.

Here is what to do in case you do not want to miss a deadline

  1. An online account created would help you keep a track of your deadlines. Setting reminders to ensure that you do not miss the deadline is the best possible way to avoid the deadline being missed.
  2. The deadline that is finalised for submitting the VAT return online is normally placed at One month and Seven Days after the end of the accounting period of the Tax
  3. Direct Debit is the most efficient way in which the deadline may be adhered with. This is with respect to the different banks and internal systems that would automatically deduct the payment from your account. For this of course and authorisation needs to be granted to the bank.
  4. Other methods could also include online payments made on the website of the department through the cards linked to your account
  5. Alternatively, a cheque may also be used for the same.

So normally there are two ways in which a missed Tax Deadline can be accommodated. One of course as described earlier would be the extension of the deadline which is granted under specified conditions. Secondly, the next method would be to immediately pay the tax once the date is missed and therefore the payments and fines should be included.

While there are other ways in which the taxes can be paid, the fact remains that better payment of taxes on time is the most probable solution for all the problems and if you are wondering why the taxes should be paid, we tell you how it makes sure that your business is well planned and better projected. Considered to be the most ethical way to conduct the business, the companies that pay the taxes on time gain more faith from the customers thereby increasing the business that has been generated. While the company taxes are meant to increase the well-being of the government, the taxes actually help the companies avail the best services from the government.

It may also be noted that while most of the taxes can be paid by self, and require just an online login, professional help in terms of guidance and calculations is also easily available. This is probably why filing the returns right before the deadlines finish is so important.

To help the masses fill up the taxes before the deadline, the instructions and directives are clearly mentioned in an easy to understand English and cater to the simple steps that are needed to fulfil the requirements.

Nile Patel has years of experience in developing cloud accounting software for accountancy firm and now have come up with his own online accounting product Easy Accountax. Nile has been working closely with accountants across UK to develop one of the best accounting software in the market with destructive pricing and unique features which no one else offers.