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.”
