Michael Cox Tax Resolution LLC

Earned Income Tax Credit – Did You Know?

Many Americans may qualify for the Earned Income Tax Credit (EITC), but do not claim it because they do not know it is available. The EITC is a fully refundable tax credit, which means that eligible filers can use it to get a tax refund even if they owe no tax.

To qualify for the credit, your 2022 income must include earned income, such as employee pay or earnings from self-employment activities like freelance or gig economy work. You also cannot have more than $10,300 in investment income, such as interest or dividends.

In addition, your adjusted gross income (AGI) for 2022 must be below the limit set by the IRS for your filing status and number of qualifying dependents. For married taxpayers who file joint returns, the 2022 AGI limit ranges from $22,610 (no dependents) to $59,187 (three or more qualifying dependents). For those who file under single, head of household or surviving spouse status, the AGI limit ranges from $16,480 (no dependents) to $53,057 (three or more qualifying dependents).

In order to claim the EITC, you must file a 2022 federal tax return, even if you would not ordinarily be required to file based on your income. A tax professional can help you file your return electronically, and set up direct deposit to get your refund as quickly as possible.

Missing or Incorrect W-2s or 1099s – Did You Know?

When the time comes to get your taxes filed, it can be frustrating to discover that you have not received the documents you need to complete your return. This problem occurs most often with Form W-2 (Wage and Tax Statement for employees) or the various versions of Form 1099 (for earnings as an independent contractor, pension or IRA distributions, etc.).

If you have not received an anticipated W-2 or 1099, you should first contact the employer or payer to request the missing document. The same applies if a form you received contains incorrect information.

If you have received an incorrect Form 1099-G for unemployment compensation from your state employment office, contact the agency immediately. An incorrect form may indicate that a scammer collected unemployment benefits using your Social Security Number (SSN).

Reporting Digital Asset Transactions to the IRS – Did You Know?

Since 2020, the IRS has required taxpayers to answer a question about their involvement with virtual currencies on their tax returns. For tax year 2022, the IRS has replaced the term “virtual currencies” with “digital assets,” a category that includes not only cryptocurrencies and stablecoins, but also non-fungible tokens (NFTs).

Generally, you must answer “Yes” to the digital asset question if any of the following occurred in 2022:
- You received digital assets as payment for labor, goods or services.
- You traded digital assets or gave them away as gifts.
- You received digital assets as an award or reward, as a result of a hard fork, or due to mining, staking or similar activities.
- You sold a digital asset for cash, exchanged it for other (non-digital) property, or otherwise disposed of your financial interest in it.

You may generally answer “No” to the question if you simply held digital assets throughout 2022, moved digital assets between your digital wallets, or purchased digital assets for cash.

Generally, if you receive digital assets as payment for labor or services, you must report the value of the assets as employee income or, if you are self-employed, as business income. Many other transactions could result in a taxable capital gain. A tax professional can help you properly report your digital asset transactions, and figure and pay any tax due on them.

Filing Deadline for W-2 and 1099 Forms

Taxpayers who paid employees or independent contractors in 2022 are reminded to file all required payment reporting forms by January 31, 2023.

If you operate a business and pay employees, you generally must file a Form W-2 for each employee with the Social Security Administration (SSA) by January 31. You must also send each employee a copy of their W-2

January 31 is also the deadline for 1099 forms if you are required to file 1099-MISC and 1099-NEC forms.

A business tax professional can help you determine whether you need to file W-2 or 1099 forms, and may also be able to help you submit the forms electronically.

Standard Mileage Rates for 2023 – Did You Know?

The IRS has updated the 2023 standard mileage rates for vehicle uses that qualify for a tax deduction. These rates apply for most passenger vehicles, including cars, vans, SUVs and pickup trucks. Here are the main mileage rates for this year:

- 65.5 cents per mile for business use of a vehicle (up 3 cents from midyear 2022)
- 22 cents per mile for certain medical purposes or moving purposes for qualified active-duty Armed Forces members (same as midyear 2022)
- 14 cents per mile for vehicle use for qualifying charitable work (unchanged)

In most cases, taxpayers who qualify to claim a vehicle expense deduction may either use the standard mileage rate or actual expenses to figure their deduction. However, if you use your car or truck for business, you generally must use the standard rate for the first year you put the vehicle in service if you want to preserve this option for future years.

A tax professional can help you determine whether the standard mileage rate or actual expenses will result in a larger deduction in your circumstances. Keep in mind that if you choose to deduct actual expenses, you will need to keep detailed records of all vehicle-related costs.

'Tis the Season for Important Tax Paperwork

Keeping your records organized will help make sure you don't miss out on valuable deductions when it is time to file. Many taxpayers will receive year-end income statements from employers, banks, stock issuers and other sources in January and early February.

The most common documents include:

- W-2 forms from your employers, showing your wages and any taxes withheld
- Forms 1099-INT and 1099-DIV showing your interest and dividend income
- Forms 1099-MISC and 1099-NEC showing gig economy and other self-employment earnings, along with rents, royalties and other miscellaneous income
- Form 1099-K from payment processing services like PayPal and CashApp if you received $600 or more in payments through one of these platforms for goods or services
- Records of virtual currency (including crypto) transactions
- Charity donation receipts
- Health Insurance statements (like Form 1095)
- Proof of qualifying educational expenses (like Form 1098-T)
- Mortgage interest statements

Giving Tuesday and Charitable Donations - Did You Know?

Millions of Americans will contribute to their favorite charities on Giving Tuesday (November 29), and throughout the holiday season. Charitable donations are often described as tax-deductible, but whether you can claim a deduction for your contribution depends on several factors.

First, you generally must itemize deductions on your tax return to claim a deduction for charitable donations. Therefore, your donation will not be deductible if you use the standard deduction. Note that the special rules that allowed taxpayers who did not itemize to deduct certain monetary donations in 2020 and 2021 have now expired. A tax professional can help you determine whether itemizing deductions would be advantageous for you.

If you do itemize deductions, you may generally deduct donations of money or property to any eligible tax-exempt charity. If you are unsure whether an organization qualifies to receive tax-deductible donations, the IRS Tax-Exempt Organization Search tool (link below) can help.

Tax-Exempt Organization Search: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search