As we celebrate the holidays and welcome the New Year, it is time to start thinking about your 2022 tax returns which are due on April 18th, 2023.
Listed below are the income thresholds for filing a tax return 2022:
Single and under age 65: $12,950
Single and age 65 or older: $14,700
Married filing jointly and both spouses are under age 65: $25,900
Married filing jointly and one spouse is age 65 or older: $27,300
Married filing jointly and both spouses are age 65 or older: $28,700
Married filing separately: $5
Head of household and under age 65: $19,400
Head of household and age 65 or older: $21,150
Qualifying widow(er) under age 65: $25,900
Qualifying widow(er) age 65 or older: $27,300
Even if you are not required to file a tax return, there are certain situations when you might want to file anyway. There are several credits that can result in a tax refund even if your income is below the filing thresholds listed above. Self-employed individuals are required to file an income tax return if their income from self-employment is $400 or more.
A standard deduction generally reduces your taxable income, but taxpayers can also opt for itemizing deductions if they exceed the amount of the standard deduction. Such itemized deductions can include mortgage interest, state and local taxes such as real estate and property taxes, out of pocket medical and dental bills, and charitable contributions.
Stimulus checks that were available in 2020 and 2021 have disappeared. But there are many tax credits still available like the Earned Income Credit (EIC), child tax credits, education credits, and Advance Premium Tax Credits that can reduce your tax burden and even result in a tax refund.
Every individual has a different tax situation. A high-income earner can afford to get professional planning and expert tax services. But low-income individuals, even if they are not required to file or pay taxes, also need planning services. They may be eligible for a refund on taxes withheld on their paychecks, or other credits that they may be entitled to.
Self-employed individuals like Uber and Lyft drivers, food delivery drivers, part-time gig workers, etc. are considered independent contractors. If they receive a form 1099-NEC, 1099-Misc, or a 1099-K, this indicates reportable income for taxation purposes. Most of the time no taxes are withheld when these workers are paid, but because they are self-employed, they are still liable for paying their own Social Security and Medicare taxes that are 15.3% of their net income after deducting allowable expenses to run their business. Many workers in this category are not aware of this and often land into big problems years later. None of the above earners are out of the sight of Uncle Sam, and the IRS will eventually find them. Sooner or later, they will start to receive notices of taxes due with additional penalties and interest charges that increase as time goes by. So, self-employed and small businesspeople should also do their tax planning in advance and pay quarterly estimated taxes to avoid such a situation.
Retired people also need tax planning as many types of retirement distributions form IRA’s, etc. are sometimes subject to income tax. Not reporting distributions can invite the scrutiny of the IRS.
So, any economic activity, big or small, needs some form of tax planning in order to have peace of mind down the road. The tax season begins in mid to late January. At that time, you should start to gather together your tax forms like your W-2s, 1099s, business expenses if self-employed, etc. and make sure that nothing is missing. You can file on your own or acquire the services of paid tax preparers. There are also programs free or low cost for individuals and families (see qualifications at https://www.irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers).
Low-Income Taxpayer Clinics (LITC) can provide you free-of-charge assistance in dealing with any unresolved issues or disputes with the IRS and state authorities. You can contact the AACA Low-Income Taxpayer Clinic (AACA LITC) for assistance in English, Chinese, Vietnamese, Gujarati, Hindi, Swa-Creole, and French at https://aaca-boston.org/low-income-taxpayer-clinic-litc/.
Bipinchandra Modi
Yi Fu
AACA LITC
