Written by Katy Estrada, CPA | Updated January 4, 2023

Getting Your Tax Documents Organized

Below is a list of items I think pertain to most taxpayers. The last page is my customized checklist/organizer to help you gather your documents when the time comes to prepare your 2022 tax returns. I recommend filling out this checklist and returning it to me with your documents. I do not need original documents. Feel free to scan and email, text or fax if this is more convenient for you. I will provide your tax returns to you via Google Drive or DropBox this year to save time, paper, envelopes and postage. It is a free service for online document retention that is secure. Paper copies need to be done via special request. You are welcome to upload your documents using this system as well. Email me for more information or links.

If you need of assistance with your late or extended filing, we’re here to help. However, please be aware that as of August 15th, our prices for filing support increased by 20%.

We understand that staying on top of your tax obligations can be challenging, but now is the time to act. Don’t hesitate to contact our team today to secure our services and ensure a seamless tax filing process.

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    Current tax deadline is April 18, 2023.  I’ll need your documents by March 31, 2023 or I’ll assist in filing an extension.  Corporate deadline is March 15, 2023.

    Get Organized

    Taxpayers should develop a recordkeeping system − electronic or paper − that keeps important information in one place. This includes year-end income documents like Forms W-2s, Forms 1099 for stock sales, Form 1099-K, Form 1099-NEC, Form 1099-MISC, and/or Form 1099-INT for example.  Ensuring their tax records are complete before filing helps taxpayers avoid errors that lead to processing delays. When they have all their documentation, taxpayers are in the best position to file an accurate return and avoid processing or refund delays or IRS letters.

    Update Your W4

    Please update your W4 form for 2023 with your employer now!  If you need help, I can easily email you one already filled out to give to your employer.

    Drivers Licenses Required to File in Most States

    Please provide your Driver’s license number, issue date and expiration date.  You will not receive a refund without “Proof of Identity”.  The state says they are reducing identity theft. 

    To Itemize or Not, That is the Question: Difference in the Standard Deduction

    The standard deduction is an automatic reduction in what you owe in taxes. When you pay taxes, you have the option of taking the standard deduction or itemizing your deductions. If you itemize, you calculate your deductions one by one. Itemizing is more of a tedious, but it’s worth it if your itemized deductions exceed the amount of the standard deduction.  Itemizing will not be worthwhile for millions of households.  Itemized deductions include medical expenses, SALT (state and local taxes), mortgage interest and charitable donations.

    Filing Status 2020 Standard Deduction 2021 Standard Deduction 2022 Standard Deduction 2023 Standard Deduction
    Single $12,400 $12,550 $12,950 $13,850
    Married Filing Jointly $24,800 $25,100 $25,900 $27,700
    Married Filing Separately $12,400 $12,550 $12,950 $13,850
    Head of Household $18,650 $18,800 $19,400 $20,800

    Itemized Deductions That Are Disappearing

    Still no longer deductible on personal returns: Unreimbursed employee expenses, Tax preparation expenses, Alimony payments, Moving expenses, Employer-subsidized parking and transportation reimbursement.

    2022 Mileage Rates

    Rates from 1/1 to 6/30/2022 – 58.5¢ per mile for business miles driven, 18¢ per mile driven for medical or moving purposes and 14¢ per mile driven in service of charitable organizations.

    Rates from 7/1 to 12/31/22 – 62.5¢ per mile for business miles driven, 22¢ per mile driven for medical or moving purposes and 14¢ per mile driven in service of charitable organizations.

    Note: you can deduct your mileage calculation OR your actual expenses, not both.  Once you choose a deduction method, you must use that method for the life of that vehicle.  Also, if you itemize personal deductions, please provide me with the miles you drove to donate to charity, volunteer, go to doctor visits or pick up prescriptions.  This could add up to a great deduction.

    Retirement Contributions

    Traditional and ROTH IRA contributions are the lesser of $6,000 or 100% of earned income.  The annual ‘catch-up´ contributions if you are age 50 and over remain at an additional $1,000.  IRA’s must be funded before April 15, extensions not included.

    Business owners can contribute to a SEP (Self-employed Plan) which is an IRA with contribution limits of 25% of the owner’s salary or up to $61,000, whichever is smaller.  You may set up and fund a SEP as late as your tax-return filing date, including extensions. 

    Energy Tax Credit

    Recently extended through 2034.  To qualify for the 30% Residential Clean Energy Credit, your solar system needs to be installed and deemed operation by a city inspector in any of the tax years 2022-2032. The 30% credit applies retroactively to systems installed in 2022 when the credit was at the old rate of 26%.

    Clean Vehicle Credit

    You may qualify for a credit of $2,500 to $7,500 if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032. The credit is nonrefundable, so you can’t get back more on the credit than you owe in taxes. You can’t apply any excess credit to future tax years.

    American Opportunity Credit

    This tax credit of up to $2,500 of the cost of tuition, fees and course materials paid during the taxable year for you or your dependent. Also, 40% of the credit (up to $1,000) is refundable. This means you can get it even if you owe no tax.  If you have higher than $80,000 of Adjusted Gross Income ($160,000 for joint filers), the credit is reduced.  If your AGI is greater than $90,000 ($180,000 for joint filers) you cannot claim the credit.

    Child Tax Credit

    For the 2022 tax year, the CTC is worth $2,000 per qualifying dependent child if your modified adjusted gross income is $400,000 or below (married filing jointly) or $200,000 or below (all other filers).

    Health Insurance

    Beginning in 2014 and forward, you have to reconcile your health care coverage and credits on your tax return. For most taxpayers, I will simply check a box to indicate that each member of your family had qualifying health coverage for the whole year through your employer.

    If you obtained a coverage exemption from the Marketplace or you qualify for an exemption that you can claim on your return, please provide me with the tax form 1095A provided to you at year end.

    There is no penalty for not having health insurance in 2022.

    Employer Providing Health Insurance

    A small business does not have to provide health insurance for its employees if you have fewer than 50 employees.  This is a common question for small business.  If you are an S-corporation, and paying your health insurance premiums and adding them to your W2, there are special rules under the Affordable Health Care act if you are using the Health care exchange and any subsidies.

    Note: Have you considered creating an HSA for you or your employees?  A Health Savings Account allows a business to reimburse the owner and/or employees for medical expenses.  This creates a 100% business deduction instead of the personal itemized deduction which is often not met.

    Qualified Business Income Deduction (QBI)

    Under this relatively new law, taxpayers with pass-through businesses will be able to deduct 20% of their qualified pass-through income. In other words, if you own a small business and it generates $100,000 in profit, you’ll be able to deduct $20,000 of it before the ordinary income tax rates are applied.

    If your total taxable income — that is, not just your business income but other income as well — is at or below $170,050 for single filers or $340,100 for joint filers in 2022 you may qualify for the 20% deduction on your taxable business income. In 2023, the limits rise to $182,100 for single filers and $364,200 for joint filers.

    IRS Correspondence

    The IRS “does not initiate contact with taxpayers by e-mail to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.” I have seen an increase in Spam in recent years.  Do not open such emails and block the sender for safety.  Also keep in mind they will not call.  You will only receive letters via United States Postal services to the address last filed on your return.

    Note: Congress has enacted new legislation that more than doubles most penalties for late or incorrect information returns. This includes the Form W-2s and Form 1099s that a business must provide to any contractor it pays at least $600 for services. These returns are due to recipients by January 31, 2022 and the IRS soon after.

    Visit Tax Scams – How to Report Them (https://www.irs.gov/businesses/small-businesses-self-employed/tax-scams-how-to-report-them) for more information.

    In order to guarantee your return is filed timely, PLEASE HAVE YOUR TAX DOCUMENTS TO ME BY MARCH 31, 2023.  If your documents are received after this date, I can file an extension on your behalf.  I will also help estimate if you owe and we can file an estimated tax due to avoid late payment penalties as taxes are due on April 18, whether you file your return or not.

    Thank you again for selecting me as your Certified Public Accountant. It is my privilege to provide you with professional services.  I wish each of you a healthy and prosperous new year.

    Yours Truly,

    Katy Estrada, CPA Signature

    Katy Estrada, CPA

    For more information, visit www.katyestradacpa.com

    I want each client to feel like they are my only client.

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