There were two significant developments at the very end of 2022.
- First, the dreaded 1099K forms that were to be sent out in huge numbers this month have been pushed back a year. Congress moved the threshold for these forms, which report income from gig economy jobs, online sales, and online rentals, from $20,000 down to $600. Most tax pros were expecting an onslaught of questions regarding these new forms, and some people may still get them for 2022, due to the late December decision by the IRS. But for tax year 2023, everyone who has side income through these gig economy apps needs to be prepared to deal with the forms next tax season.
- Congress passed a retirement reform package at the end of the year called Secure 2.0 that made a number of changes to retirement plans. The highlights include:
– Starting in 2023, the required minimum distribution (RMD) age will rise to 73 for those who turn that age during the year, eventually rising to 75 later on. Penalties for missed RMD’s will also go down.
– Beginning in 2024, retirement account holders will be allowed to take out one-time family emergency withdrawals of up to $1,000 a year with no penalties.
– In 2025, companies with retirement plans will be required to automatically enroll their employees (who can still opt out) in a plan. Note that for Illinois, all companies with 16 or more employees are currently required to offer retirement plans under the new Secure Choice program.
– Also in 2025, a new searchable database should be available for people to find zombie retirement accounts that were opened and forgotten at previous employers.
– And in 2027, a new saver tax credit will debut that will provide matching federal funds for those who contribute to retirement plans and meet income requirements. This replaces a much smaller saver’s credit that is available now.
These are only some of the highlights of this new bill that was passed at the end of 2022. There is a lot of concern about the lack of retirement savings, with nearly half the nation having very little saved for retirement due to lack of income and access.
As I mentioned in my last newsletter, be on the lookout for savings on home energy tax credits and clean vehicle purchases in 2023.
Home energy efficiency includes such things as central air conditioners, furnaces, hot water heaters, energy audits, windows and doors. The new legislation has more than doubled the credit from $500 lifetime to $1200 per year (with many stipulations).
Clean vehicles include electric cars and plug-in hybrids, but they must be assembled in North America and contain certain parts that auto companies are trying to comply with. The latest list of qualifying vehicles for the $7500 tax credit can be found here.