Over the past few months, we have shared many ways you can prepare for this upcoming tax season. What we haven’t yet covered are the many tax changes that have occurred since you filed last year. (Some 2022 changes we thought would affect taxpayers this year have changed yet again since 2023 started!) Let’s review some of the major changes that could affect your tax return for the 2023 filing year.
Reduction in Certain Tax Credits
There are quite a few reductions in tax credits that could affect your tax return this year, or reduce what you receive back from the IRS. Both the child tax credit and the child and dependent care tax credit have been reduced for 2022. During the American Rescue Plan of 2021, both tax credits received a temporary boost. These tax breaks, however, were not extended to this year. This may mean a significant difference in what your tax return looks like.
Changes in Charitable Deductions
If you donate regularly to a charity and have been able to claim charitable donation tax breaks in the past, you may be in for a shock this year. A huge change for the 2023 tax season is how much of your charitable donations you can deduct. The expanded charitable cash contribution benefits that were offered in 2020 and 2021 have ended. The temporary suspension of the 60% AGI limit in 2020 and 2021 is now back, limiting the amount you can claim in charitable contributions.
1099-K Changes Delayed Until 2023 Tax Year
Remember that comment we made about 2022 tax changes changing yet again? Here’s what we were referring to. The IRS was set to make massive changes to the 1099-K form for this tax season, but those changes have just been delayed until the 2024 tax season. When you file your taxes in early 2023, a 1099-K form is only required if you’ve had more than 200 third-party business transactions a year and they’ve added up to more than $20,000 of income. These are the same thresholds for 1099-K forms as previous years. Basically, you’ll receive a 1099-K form during tax season 2024 if you accept payments for goods or services over a third-party network (think Venmo, PayPal, Stripe, Square, Zelle and Cash App) that are more than $600, even if it’s just one transaction over $600. We will cover more of that in a future article as we approach the 2024 tax season!