5 Tax Changes Accountants and Bookkeepers Must Know for 2023

Tax season is in full swing and I know you are as excited as I am!  If you haven’t heard, let me break the news to you: January 23rd was the official date when IRS started accepting e-file returns. I am sure your phone won't stop ringing and receiving calls from clients asking about all the changes that happened in 2022 that will affect their 2023 tax liability.

As a Tax Planner, I like to look at the past to view my accuracy and always look into the future to see what I can do better. This helps me prepare for what will be my best year ever and set myself up for success. It is my pleasure to present to you this column and to keep you informed about key changes accountants and bookkeepers need to know to serve their clients this tax season.

The most important changes for 2022 returns

With the start of tax season, tax professionals will have attended as many tax updates classes and seminars as possible. This is because some laws and provisions are not released until the end of the year and sometimes even early into the season. I have attended three of these types of those seminars myself, and I would love to share what I believe are the most important changes. I'll start with these five, but I invite you to continue to follow this column throughout the year to learn what else I have to share with you. That said, let's dig in.

1.    The Inflation Reduction Act

The Inflation Reduction Act includes several credits and deductions, as well as new and renewed tax regulations that will impact both individuals and corporations. The credits provide incentives for investing in energy-efficient improvements, equipment, and vehicles. Updates and further information can be tracked on the IRS website.


2.    California Storm Victims

For clients affected by the California storms last month, the IRS has granted relief by extending the corporate, individual tax, and other tax filing requirements to May 15 per tax relief ruling IR-2023-03 — January 10, 2023. This means that individual taxpayers can skip making the fourth quarter estimated tax payment, normally due January 17, 2023, and instead include it with the 2022 return they file on or before May 15.

3.    2023 Clean Vehicle Credits

Taxpayers may qualify for a credit of up to $7,500 under Internal Revenue Code Section 30D if they 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 available to individuals and their businesses. To qualify, taxpayers must:

• Buy it for your own use, not for resale.
• Use it primarily in the U.S.

In addition, modified adjusted gross income (AGI) may not exceed:

• $300,000 for married couples filing jointly 
• $225,000 for heads of households
• $150,000 for all other filers

You can use your modified AGI from the year you took delivery of the vehicle or the year before, whichever is less. If your modified AGI is below the threshold in one of the two years, you can claim the credit. 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.

4.    1099-K Reporting

On Dec. 23, 2022, the IRS announced that the calendar year 2022 will be treated as a transition year for the reduced reporting threshold of more than $600. For calendar year 2022, third-party settlement organizations who issue Forms 1099-K are only required to report transactions where gross payments exceed $20,000, and there are more than 200 transactions. This means that many small companies, such as Schedule C filers, have more time to get organized and make sure not to mix their personal and business expenses anymore. Many taxpayers, especially small ones, tend to mix personal and business expenses and/or receive payments via platforms such as Venmo or Zelle. 

5.    Schedule K-2 & K-3

The new schedules K-2 and K-3 were created to provide consistency in the reporting to partners and shareholders.  Prior versions of schedules K and K-1 did not require any specific format to provide international information, resulting in what could be a confusing array of statements attached to schedules K and K-1.  

The new schedules K-2 and K-3 provide greater certainty and consistency, helping partners and shareholders to comply with their filing and reporting obligations voluntarily.  The greater certainty also enables the IRS to verify that partnership and S corporation items are properly reported on partners’ and shareholders’ returns.  This should reduce the burden on both taxpayers and the IRS by reducing unnecessary inquiries and examinations that may arise due to inconsistent reporting of partnership and S corporation items.

Bonus: Beware of Tax Scams                                    

With the new tax season starting this week, the IRS reminds taxpayers to be aware that criminals continue to make aggressive calls posing as IRS agents in hopes of stealing taxpayer money or personal information.

Here are some telltale signs of a tax scam and actions taxpayers can take if they receive a scam call.

• Call to demand immediate payment using a specific payment method, such as a prepaid debit card, gift card, or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
• Threaten to immediately bring in local police or other law enforcement groups to have the taxpayer arrested for not paying.
• Demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed. 
• Call unexpectedly about a tax refund.
  
  Taxpayers who receive these phone calls should:

• Record the number and then hang up the phone immediately. 
• Report the call to TIGTA using their IRS Impersonation Scam Reporting form

Report the number to phishing@irs.gov and be sure to put "IRS Phone Scam" in the subject line.

Let's stay up to date!

Thank you for taking the time to read this summary of changes in the tax law that might affect how you communicate certain things to your clients. Many of our clients are unfamiliar with these changes, and they expect their bookkeeper or accounting professional to be up to date and provide guidance. I hope that these key points help you understand some of the changes and will help you serve your clients better.