A Hodgepodge of Loose Ends To Tie Up Before The 2022 Tax Filing Season

This final quarter of 2022 has already been flooded with announcements from the IRS that will affect many taxpayers in the upcoming tax season. Who knows, there may be even more before the end of the year. The information has been coming out in a hodgepodge fashion and it’s easy to miss it. I’m pulling all the loose ends together here. Not all the announcements will apply to everyone, so review and see which ones apply to you.

Per Diem Allowances

This IRS announcement came at the end of September and applies to per diem expenses beginning on October 1, 2022. The amount of the increase is negligible, however, the tax implications come depending on whether an allowance amount is deemed substantiated because the amount does not exceed the applicable limit. In this case, any unspent amounts do not have to be taxed or returned. If, however an employer pays per diem allowances that exceed what is deemed substantiated, the employer must either treat the excess as taxable wages or require actual substantiation. If substantiation is required, any unsubstantiated portion of the allowance must be returned or treated as taxable wages. Something to keep in mind if you have significant per diem expenses.

As an employee, you can no longer deduct unreimbursed expenses due to the suspension of miscellaneous itemized deductions by the Tax Cuts and Jobs Act, so this announcement does not apply.

Social Security Cost of Living Increase

The Social Security Administration (SSA) announced a cost-of-living adjustment (COLA) of 8.7% for both Social Security and Supplemental Security Income (SSI) benefits beginning in January 2023.  In addition, they announced that individual taxable earnings of up to $160,200 annually will be subject to Social Security tax in 2023. Another bit of good news from the SSA for retirees receiving Social Security benefits: you’ll be able to earn $56,520 in the year you reach full retirement age before your benefits are reduced by $1 for every $3 in earnings over the limit. That is an increase of nearly $5,000. For those younger than full retirement age, your earnings can be up to $21,240 in 2023 before benefits are reduced by $1 for every $2 in excess earnings. An increase from $19,560 in 2022.

Remote Workers Taxation

With so many remote workers, it’s getting tricky to get a handle on how to tax workers who are in a different state than the company they’re working for. This can be detrimental to both employer and employees. That may require taxation by both states, or in some cases multiple states. This could include worker’s compensation taxation too. Currently, there’s no federal solution and every state works differently. You’ll find that pandemic guidance on temporary telecommuting does not apply since that has long expired. This is an area that will require guidance from your tax preparer.

These And Any Other Tax Issues

If you need help figuring out any of the tax issues above in the 2022 tax season or with any other new or lingering tax problem, give my office a call. We like helping our clients stay on the IRS’s good side.