October 2022 – Larson Accounting Group

24 de October de 2022

WASHINGTON — The Internal Revenue Service announced today that the amount individuals can contribute to their 401(k) plans in 2023 has increased to $22,500, up from $20,500 for 2022. The IRS today also issued technical guidance regarding all of the cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2023 in Notice 2022-55PDF, posted today on IRS.gov.

Highlights of changes for 2023

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $22,500, up from $20,500.

The limit on annual contributions to an IRA increased to $6,500, up from $6,000. The IRA catch‑up contribution limit for individuals aged 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $7,500, up from $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $30,000, starting in 2023. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2023.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase‑out ranges for 2023:

For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $73,000 and $83,000, up from between $68,000 and $78,000.
For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $116,000 and $136,000, up from between $109,000 and $129,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000.
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000. For married couples filing jointly, the income phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $73,000 for married couples filing jointly, up from $68,000; $54,750 for heads of household, up from $51,000; and $36,500 for singles and married individuals filing separately, up from $34,000.

The amount individuals can contribute to their SIMPLE retirement accounts is increased to $15,500, up from $14,000.

Details on these and other retirement-related cost-of-living adjustments for 2023 are in Notice 2022-55PDF, available on IRS.gov.

Source: IRS

by Larson Accounting

18 de October de 2022

WASHINGTON – The Internal Revenue Service reminded families today that some taxpayers who claim at least one child as their dependent on their tax return may not realize they could be eligible to benefit from the Child Tax Credit (CTC).

Eligible taxpayers who received advance Child Tax Credit payments last year should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments last year can claim the full credit by filing a 2021 tax return.

The IRS urges grandparents, foster parents or people caring for siblings or other relatives to check their eligibility to receive the 2021 Child Tax Credit. It’s important for people who might qualify for this credit to review the eligibility rules to make sure they still qualify. Taxpayers can use the Interactive Tax Assistant to check eligibility. Taxpayers who haven’t qualified in the past should also check because they may now be able to claim the credit. To receive it, eligible individuals must file a 2021 federal tax return.

What is the Child Tax Credit expansion?

The Child Tax Credit expansion, which is a part of the American Rescue Plan, increased the amount of money per child families can receive and expanded who can receive the payments.

The American Rescue Plan increased the Child Tax Credit from $2,000 to $3,600 per child for children under the age of six, from $2,000 to $3,000 for children over the age of 6 and raised the age limit from 16 to 17 years old.

The American Rescue Plan Act of 2021 expanded the Child Tax Credit for tax year 2021 only.

Who qualifies for the Child Tax Credit?

Taxpayers can claim the Child Tax Credit for each qualifying child who has a Social Security number that is valid for employment in the United States and issued by the Social Security Administration before the due date of their tax return (including an extension if the extension was requested by the due date).

To be a qualifying child for the 2021 tax year, the dependent generally must:

Be under age 18 at the end of the year.
Be their son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister or a descendant of one of these (for example, a grandchild, niece, or nephew).
Provide no more than half of their own financial support during the year.
Have lived with the taxpayer for more than half the year.
Be properly claimed as their dependent on their tax return.
Not file a joint return with their spouse for the tax year or file it only to claim a refund of withheld income tax or estimated tax paid.
Have been a U.S. citizen, U.S. national or U.S. resident alien.

What are the eligibility factors?

Individuals qualify for the full amount of the 2021 Child Tax Credit for each qualifying child if they meet all eligibility factors and their annual income is not more than:

$150,000 if they’re married and filing a joint return, or if they’re filing as a qualifying widow or widower.
$112,500 if they’re filing as a head of household.
$75,000 if they’re a single filer or are married and filing a separate return.

Parents and guardians with higher incomes may be eligible to claim a partial credit. Claiming these benefits can result in tax refunds for many individuals. Individuals should file electronically and choose direct deposit to avoid delays and receive their refund faster.

Finding free tax return preparation

A limited number of Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA/TCE) program sites remain open and available to help eligible taxpayers get their tax returns prepared and filed for free by IRS trained and certified volunteers. Low- and moderate-income taxpayers as well as those age 60 and above can check to see if there is an available site in or near their community by using the VITA/TCE Site Locator.

IRS Free File available until Nov. 17 to help more people receive credits

The IRS Free File program, available only through IRS.gov and offered in partnership the tax software industry’s Free File Alliance, offers eligible taxpayers brand-name tax preparation software to use at no cost. The software does all the work of finding deductions, credits and exemptions for which the taxpayer qualifies. It’s free for most individual filers who earned $73,000 or less in 2021. Some of the Free File packages also offer free state tax returns to those who qualify. Taxpayers who earned more than $73,000 in 2021 and are comfortable preparing their own taxes can use Free File Fillable Forms. This electronic version of paper IRS tax forms is also used to file tax returns online.

To help more people claim a variety of tax credits and benefits, Free File will remain open for an extra month this year, until November 17, 2022.

The IRS is sending letters to more than 9 million individuals and families who appear to qualify for a variety of key tax benefits but did not claim them by filing a 2021 federal income tax return. Many in this group may be eligible to claim some or all of the 2021 Recovery Rebate Credit, the Child Tax Credit, the Earned Income Tax Credit and other tax credits depending on their personal and family situation. The special reminder letters, which will be arriving in mailboxes over the next few weeks, are being sent to people who appear to qualify for the Child Tax Credit, Recovery Rebate Credit (RRC) or Earned Income Tax Credit (EITC) but haven’t yet filed a 2021 return to claim them. The letter, printed in both English and Spanish, provides a brief overview of each of these three credits.

These and other tax benefits were expanded under last year’s American Rescue Plan Act and other recent legislation. Even so, the only way to get the valuable benefits is to file a 2021 tax return. Often, individuals and families can get these expanded tax benefits, even if they have little or no income from a job, business or other source. This means that many people who don’t normally need to file a tax return should do so this year, even if they haven’t been required to file in recent years.

People can file a tax return even if they haven’t yet received their letter. The IRS reminds people that there’s no penalty for a refund claimed on a tax return filed after the regular April 2022 tax deadline. The fastest and easiest way to get a refund is to file an accurate return electronically and choose direct deposit.

Source: IR-2022-181, October 17, 2022

by Larson Accounting

6 de October de 2022

WASHINGTON – The Internal Revenue Service today reminds U.S. citizens, resident aliens and domestic legal entities that the extension deadline to file their annual Report of Foreign Bank and Financial Accounts (FBAR) is October 15. For additional information about filing deadlines, filers should look to Financial Crimes Enforcement Network’s (FinCEN) websitePDF.

Filers who missed the April 15 annual due date earlier this year received an automatic extension until October 15, 2022, to file the FBAR. They did not need to request the extension.

Who needs to file?

The Bank Secrecy Act requires U.S. persons to file an FBAR if:

They have a financial interest in or signature or other authority over one or more accounts, such as a bank account, brokerage account, mutual fund or other financial account located outside the United States, and

The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year 2021.

Because of this threshold, the IRS encourages U.S. persons with foreign accounts, even relatively small ones, to check if this filing requirement applies to them. A U.S. person is a citizen or resident of the United States or a domestic legal entity such as a partnership, corporation, limited liability company, estate or trust.

How to file

Filers do not file the FBAR with their federal income tax return. The 2021 FBAR must be filed electronically with FinCEN and is only available through the BSA E-Filing System website. Individuals who are unable to e-file their FBAR must contact FinCEN at 800-949-2732 or FRC@fincen.gov to request an alternative filing method. Callers from outside the U.S. can contact the helpline at 703-905-3975.

Avoid penalties

Those who don’t file an accurate FBAR when required may be subject to significant civil and criminal penalties that can result in a fine and/or imprisonment, depending on the facts and circumstances.

401(k) limit increases to $22,500 for 2023, IRA limit rises to $6,500