IRS Tax Changes in 2023

Importance of Staying Up-to-Date

Things like taxes and reporting must be ever-changing to keep up with the demands of an evolving financial market. Between things like inflation, recession, and emergency relief, it can be challenging to keep up with the annual changes to tax requirements. The question becomes, after years and years of observed changes, why bother learning about each new policy and procedure? Most Americans count on professional assistance to successfully file their taxes, anyway, whether it be from a CPA or third-party tax filing software like TurboTax, so knowing the intricacies of tax law does not seem strictly necessary. 

While you can probably get away with not keeping up with every little change made throughout the year, being aware of both major and minor changes to the IRS’s tax policies can help save you a ton of time, money, and stress in the long run. Changes made to things like tax brackets, deductions, credits, and claims will likely have an impact on your tax return or how much you owe to the IRS. This is especially important if you expect to owe money back to the government. Budgeting for your tax year is something that millions of people have to do and major changes in tax law can increase how much you owe Uncle Sam by thousands of dollars. Not accounting for these changes can put you in a sticky situation and can lead to tax debt if you are unable to pay the full amount. 

Staying up to date with tax changes can be difficult, as they are not covered in much detail by popular news outlets or magazines. We cannot expect the same level of coverage of our tax changes from our preferred news outlets as we can expect from politicians and celebrity gossip. If you are active on social media, there are plenty of accounts (including the official IRS accounts) that publish updates in real-time. You can also subscribe to newsletters and text alerts via IRS.gov or other dedicated tax reporting outlets. 

Create Your 2023 Tax Plan

Tax planning is one of the most important aspects of any person’s annual fiscal plan. At the end of the day, successfully optimizing your tax returns can make or break your finances for the entire year. Ensuring that you are getting everything extra penny possible to mitigate your income and business costs. Tax planning is also a great way to ensure that you are staying on top of all compliance requirements. 

To ensure that you are ready to file your 2022 taxes on time and without missing anything vital, you should make sure that you have a few forms and receipts on hand. Before you go to your CPA appointment or log in to your H&R Block account, use this quick checklist to make sure you have everything you might need to file your tax return. 

• Last Year’s Tax Information
• Social Security Cards 
• Tax ID Numbers
• IRS.gov Login Information
• W-2 Forms
• 1099 Forms
• Retirement Account Contributions
• 1098 Form and Educational Expenses
• Medical Bills
• Property Taxes and Mortgage Interest Forms
• Charitable Donations Receipts

What is Changing This Year?

Now that we have established the importance of keeping up the date with tax changes, it is time to go over the most major changes that will be going into effect this year and next year so that you can be as prepared as possible. Some of these changes will make minimal changes to most of our overall tax outcomes, but some could have a major impact on how much you owe this year. 

 

Credits Returning to Pre-COVID Returns

The biggest change you will likely see on your tax return this year is a return to normalcy. As we see the world shift back to in-office work, regular child-care hours, and restaurant dining rooms open once again, we are also going to see the end of those balloon tax credits and deductions meant to help families struggling because of the impact of the pandemic. After 2 years of higher returns and lower debts, we are finally returning to pre-COVID-19 numbers. 

There will be no emergency relief credits and your child tax credit is going to take a major hit. If you were counting on the same amount back from the taxes that you received in the last few years, consider readjusting your planning and budgeting for the upcoming months to best prepare for the change in policy. 

 

Deduction and Tax Bracket Shifts for Inflation

One of the most significant changes that we can expect to see in 2023 is the introduction of a new tax bracket for high-income earners. This new tax bracket is designed to target individuals who earn more than $500,000 annually and will help the government generate an even higher tax return. This is a controversial move because it is part of a move to reduce income inequality and ensure that the wealthy contribute their fair share towards the functioning of society which has been widely criticized as classist and unfair to those working for that higher wage. 

Regardless of how this move will be received, if you make more than $500k, be prepared to see a bit more of those earnings go back into Uncle Sam’s pocket this year. 

 

New 1099 Reporting Guidelines

The new 1099 reporting guidelines that have been discussed for years now are going to have been introduced as part of the 2023 tax policy changes, and they have significant implications for both individuals and businesses. Under the new guidelines, all businesses are required to report any payments made to independent contractors or freelancers who earn more than $600 in a year. This information must be reported on a 1099 form, which must be filed with the IRS by the end of January each year. The intention behind this change is to ensure that all income is properly accounted for and taxed.  It is also meant to reduce the amount of tax evasion that occurs through the underreporting of income. 

The new 1099 form reporting guidelines will include private payment apps like Venmo, CashApp, and Zelle. These apps will be sending out 1099 forms to any individual who is sent over $600 from one person, regardless of how many transactions the amount is spread out through. These changes have the potential to have a major impact on how businesses operate and will require them to keep detailed records of all payments made to contractors and freelancers.

 

What Happens if I File Something Wrong?

If you file your taxes incorrectly, you may face any number of consequences. It is important to keep Some of the most common consequences include:

• Having to pay additional taxes: If you under report your income or make other errors on your tax return, you may owe additional taxes to the government.
• Incurring penalties and interest: The government may charge you penalties and interest on any additional taxes owed, which can quickly add up and significantly increase the amount you owe.
• Receiving an audit: In some cases, filing your taxes incorrectly may result in an audit by the Internal Revenue Service (IRS). This can be a time-consuming and stressful process, and you may be required to provide additional documentation and evidence to support the information you have reported on your tax return.
• Legal consequences: In severe cases, such as if you knowingly file a false tax return, you may face legal consequences, including fines and even imprisonment.

It is important to ensure that your tax returns are accurate and complete, to avoid these consequences. If you are unsure about how to correctly file your taxes, it is recommended that you seek the help of a tax professional.

Tax Resolution Attorney Steven Klitzner

By now you have likely realized that the IRS can be very intimidating and aggressive to the average taxpayer. Not to worry, though. That is what tax attorneys like Steven Klitzner are here for. At the Law Office of Steven Klitzner, we strive to take on that stress for you. We deal directly with the IRS on your behalf so that you no longer have to deal with harassing phone calls and letters from the IRS. When you put your case in the hands of our team, you can rest easy knowing that your tax problems are being handled by Miami’s premier tax resolution attorney. 

As an experienced tax attorney, Steven Klitzner and his dedicated team deal with the IRS on a regular basis and have the knowledge and experience to advise you of options for resolving your tax problems. 

The IRS and its representatives’ actions and advice are always going to be working in the government’s best interest. You deserve someone on your side, looking out for yours. IRS problems do not go away unless they are dealt with. In fact, they only get worse the longer you wait. To avoid any penalties or additional interest, give Steven Klitzner a call or reach out online today to get back on the path of IRS compliance!