As we come out of the last-minute gift wrapping and too many holiday goodies fog and finish out 2022, I want to take a moment and say thank you for your trust this year.
We here at Lillian’s Professional Services LLC are grateful that you choose us not only to handle the complex and sensitive details of your tax filing and planning but also that you let us look out for you on a variety of financial fronts. It is truly our pleasure and we look forward to continuing to reward you for that trust.
And one of the ways we do that here is with these weekly notes. We put effort into it and hope you see that.
Now, before I jump into discussing the SECURE Act 2.0 (all about retirement) and the recently passed trillion-dollar federal spending package, I want to deliver some continued holiday cheer to my New York/New Jersey Metro readers.
Remember when I emphasized the impending 1099-K reporting threshold was upon us? Well, last week, just before Christmas, the IRS announced a hold on that — until 2024 (at least). Whew! That means, for 2022 e-commerce transactions, the rule will revert back to the original $20,000 threshold (instead of $600).
Now you’ll have more time to adjust for the new reporting requirements for your little New York/New Jersey Metro side hustle or eBay selling, or what have you. And that’s something you can make a plan for.
Speaking of plans, if you want to get on our calendar on the early side for your 2022 taxes (or have a last-minute spending question for this week), I can be found right here:
The e-commerce world isn’t the only place where money is flitting around. It’s swirling all through D.C. right now too… in the form of federal spending. Let’s take a look at how the new trillion-dollar bill is going to affect you…
Federal Spending 2022 & Its Effect on New York/New Jersey Metro Taxpayers
“I’m spending a year dead for tax reasons.” – Douglas Adams
There seems to be a lot of money flying around Washington these days. Capitol Hill (mostly both sides of the aisle, for the moment anyway) recently signed a 1.7 trillion-dollar federal spending package that will basically keep the lights on for the federal government.
The bill is more than 4,100 pages long, with a ton of defense measures and the like – and lawmakers are stuffing it with everything but the kitchen sink. Some tax credits for individuals and for businesses didn’t survive Congressional backrooms.
They were supposed to have this all done weeks ago, by the way, but no Congress has managed that with an annual spending plan in more than a quarter century. Imagine if we ran our household finances that way …
This all comes on the heels of the Inflation Reduction Act that became law last summer and that gave a transfusion to everyone’s favorite government agency, the Internal Revenue Service.
What’s that going to mean to New York/New Jersey Metro taxpayers like you when all the dust settles? Maybe quite a bit.
This bill is one hefty piece of literature, as we said, so we’ll give you the nickel tour of a large number of items now in it.
At the last minute, for example, they plugged in the big-time retirement changes of the SECURE Act 2.0, a descendant of the Setting Every Community Up for Retirement Enhancement Act that’s built to make it easier for all of us to save for retirement. Two-Oh makes a ton of changes to the system that proponents have wanted for a long time. Among them:
- The age when you have to take required minimum distributions from your retirement account will go from 72 now to 73 next year, and then to age 75 by 2033. The penalty for failing to take RMDs would be cut from 50% to 25% and even 10%.
- Catch-up contributions for retirement savers age 50-plus would increase to 10 grand annually.
- You’ll be able to withdraw up to a grand from your retirement account for emergencies without getting smacked with the usual 10% tax penalty for early withdrawal if you’re younger than 59½.
- If you’re a part-timer, you might be eligible to join your company’s 401(k).
Some of the changes have to do with other types of accounts:
- No required RMDs from your Roth 401(k) during your lifetime;
- Tax-free conditional rollovers to Roth IRAs from 529 college savings accounts; and
- A higher, 200 grand maximum on a qualified longevity annuity contract (QLAC).
A renewed IRS
On the subject of federal spending …
Last summer the Inflation Reduction Act became law – and one of its goodies was giving the IRS 80 billion bucks over the next 10 years. The agency will spend a good slice of that on modernizing its technology and making sure we’re not all on hold for a week when we try to call them with a simple tax question. Fingers crossed.
Thing is, the IRS – for years underfunded and leaking employees – also plans to sign on 87,000 new revenue agents and has pledged to beef up enforcement of tax practices it thinks have been shady for a while. (They also claim they’re not going after the little guy with these new auditors, but …)
They’ll be right with you: The IRS is supposed to prepare for the coming tax season with more capacity at their in-person support centers, better call-answer rates and hold times, and automated scanning of millions of individual paper returns, among other improvements.
Offshore accounts: The well-heeled have been stashing assets overseas and dodging American tax laws for years. These accounts already come with strict reporting requirements – and hefty fines if you mess up. Check with us please if you have any cash in a faraway land.
Cryptocurrency: Uncle Sam is starting to think this is a juicy target. (One estimate is that the feds miss out on 50 billion dollars a year in tax money by not going after holders of crypto.) The IRS continues to hone its question about crypto on your tax return. And though their guidance remains skimpy on the topic, the IRS has said that virtual currencies are property for tax purposes, meaning you can have a capital gain or loss when you sell.
Both sides in Washington change their ideas about federal spending all the time – you can depend on us to keep you in the loop and on the right side of your taxes.
Looking out for you,