Issue 51  March 15th 2023

March 15th and April 18th

Today is the deadline to file 2022 Partnership From 1065 and S Corp Form 1120S Tax Returns. If you are not ready to file the return yet, make sure you or your tax preparer submits the extension to file on your behalf which will give you another six months (till September 15th) to get the return filed.

Since the next newsletter will go out after April 18th, which is the tax deadline to file Individual and Corporate Form 1120 income tax return, I would like to remind you that April 18th is also a deadline to make contributions into your IRAs or HAS accounts for 2022. If you are not ready to file your tax return by April 18th, make sure you file an extension, but keep in mind the extension is only extension to file not extension to pay.

If you know of someone who needs tax and accounting help, please feel free to share with them my contact information. If they are still not sure about making a move, please ask them to check out my newsletter.

For free consultation click on the link to schedule a one-on-one meeting with me over zoom or face to face. Schedule by clicking on a link below.

E-mail: dragana@dcmtax.com
Phone:318-751-5455

Smaller refunds for 2022

As of February 3rd, the IRS has already refunded almost $16 billion from about 19 million 2022 tax returns. According to the IRS so far this year the average federal tax refunds are almost 11% lower than refunds issued this same time last year. The several major tax credits were put in place during COVID-19 pandemic to help taxpayers navigate challenges and some of those popular credits are not available for 2022 or have reverted to pre-pandemic threshold amounts. Some of the major changes are related to Child Tax Credit, Earned Income Tax Credit and Child and Dependent Care Tax Credit. For more details as to what has changed and what is having an impact on lower refund, please click on the link below.

April 1st last day to take retirement distributions for 2022

April 1, 2023 Is the Required Minimum Distributions (RMD) deadline for those individuals who turned 72 last year (during 2022). RMDs are normally made at the end of the year, but people who turned 72 during 2022 are covered by a special rule that allows the first distribution to be delayed until April 1st of this year. For all years following the first year, RMDs must be made by December 31st. If your 72 birthday was in 2022 but you did not take first RMD distribution till 2023 your first distribution will be taxable for 2023 and will be reported on your 2023 income tax return. That will be in addition to the second RMD that you will receive at the end of this year (by December 31, 2023). RMDs do not apply to Roth IRAs.

In the past, if you missed the RMD deadline, you could be subject to a 50% penalty but Secure Act 2.0 reduced RMD penalties beginning this year to 25% excise tax on the late RMD or on RMDS that do not meet the minimum amount.

Rollover from 529 into IRA

The Secure Act 2.0 has added a numerous change to retirement related provisions. Under Section 126 of the act, the Internal Revenue Code is amended to allow tax free rollovers from 529 plans into Roth IRAs under certain conditions. This will allow any unused funds that were put a side for education to be moved into a Roth IRA account. This way individuals will be able to avoid income tax and penalties that occur when withdrawing funds for non-educational purposes. The lifetime limit for rollover of funds from 529 plan to a Roth IRS is $35,000. These rollovers are subject to Roth IRA annual contribution limits. The 529 plan to Roth IRA rollover will go into effect on January 1, 2024. For more details and conditions that have to be met in order for rollover to qualify, please click on the link below.

Call for increased taxes on the wealthy to reduce deficit

The Biden Administration is calling for a minimum 25% tax on the wealthiest, and a top marginal income tax rate of 39.6% up from 37% for single filers making more than $400,000 and married couples with income above $450,000 per year. The proposal includes an expanded child tax credit from $2,000 to $3,000 per child over 6 years old, and to $3,600 for children under age 6. The Administration also is proposing to raise capital gains tax from 20% to 39.6%. It also proposes taxing capital gains at the same rate as wage income for those earning more than $1 million. The House controlled by Republicans would most likely produce its own 2024 budget proposal in May. For a full article click on the link below.

Are social security benefits taxable?

Social security benefits are usually not taxable, however if you have other substantial income, then portion of social security up to 85% of it could be taxable. If you file federal tax return as single and your combined income is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is over $34,000, then 85% of your benefits may be taxable. If you are joint filer, and you and your spouse have combined income between $32,000 and $44,000, you may have to pay tax on up to 50% of your benefits. If your combined income is more than $44,000, then 85% of your benefits may be taxable. For more information on how combined income is calculated click on the link below.