Changes to several tax credits and contributions.

The IRS often scrutinizes large deductions for rental real estate losses claimed by so-called “real estate professionals.” In a new case involving a couple that wholly owned a partnership, Dunn, TC Memo 2022-112, 11/29/22, the Tax Court denied losses because neither spouse met the requisite tax law test.  

In 2021, Governor Doug Ducey signed Senate Bill 1828, which increased the maximum taxable wages from $7,000 to $8,000 for Unemployment Insurance (UI) compensation purposes, effective calendar year 2023. This legislation also made other changes to the UI program, including additional program integrity requirements. 

The Arizona Legislature substantially reduced Arizona's individual income tax rates for the 2022 tax year. The previous Form A-4 withholding rates are no longer representative of the new lower income tax rates. Employers should select the 2.0% default on behalf of the employee.

Employees will still have the option of selecting a higher Arizona withholding rate than their wages might dictate and there is still a line to add an additional amount of Arizona withholding.

The Internal Revenue Service (IRS) updated its actuarial tables that dictate how much a person is required to withdraw from his or her retirement accounts starting at age 72.  This is the first time since 2002. The new tables project longer lifespans. This could be good news for individuals that want to stretch their retirement earnings into the future.

You can use a recent Tax Court case ruling to help protect you against the Internal Revenue Service questioning your vehicle expenses.  Gonzalez, TC Summary Opinion 2022-13, 7/18/22 ruled that you can deduct vehicle expenses related to a side-gig, as long as you follow strict rules. 

What you need to know and do:

Generally, expenses relating to use of a car, van, pickup, etc. used for business are deductible. If you drive your own passenger car to visit clients or customers, you may write off the portion of your vehicle’s costs that is attributable to business use, subject to some special limits. If you use your car 80% for business, you can deduct 80% of the costs. 

The Internal Revenue Service announced on June 9, 2022 an increase to mileage rates for 2022 taxes. The changes are just for the final six months of 2022 only. Individuals taking advantage of this deduction will need to break out their mileage into the proper time category. 

You may qualify to exclude from capital gains from the sale of your primary residence if you meet these criteria:

1. Ownership test. The homeowner must have owned the home for at least two years of the five-year period ending on the date of the sale.
2. Use test. The homeowner must have used the home as their main residence for at least two years of the five-year period ending on the date of the sale.

The Internal Revenue Service is issuing information letters to recipients of the third round of the Economic Impact Payments. People receiving these letters to make sure they hold onto them to assist them in preparing their 2021 federal tax returns in 2022.

IRS Letter 6475, Your Third Economic Impact Payment, will help Economic Impact Payment recipients determine if they are entitled to and should claim the Recovery Rebate Credit on their tax year 2021 tax returns that they file in 2022.

The Internal Revenue Service is issuing information letters to Advance Child Tax Credit recipients. People receiving these letters to make sure they hold onto them to assist them in preparing their 2021 federal tax returns in 2022.

IRS Letter 6419, 2021 advance CTC, will include the total amount of advance Child Tax Credit payments taxpayers received in 2021 and the number of qualifying children used to calculate the advance payments. People should keep this and any other IRS letters about advance Child Tax Credit payments with their tax records.