With a heat wave hitting much of the nation and Arizona blistering form 25+ days of temperatures of 110 degrees or higher, air conditioning units are failing.  While the cost of a new unit can be unsettling, the US Department of Energy provides consumers the opportunity to receive tax credits of up to $2,000.  If you purchase an eligible energy efficient equipment, complete IRS Form 5695 to claim your credit.

For more information, go to Clean Energy Tax Credits for Consumers.

Business owners need to consider things besides family dynamics when hiring their parents or children. One of those things is employment taxes.

Child works for parent - When a child works for a parent's sole proprietorship or a partnership in which each partner is the child's parent:

• Payments for the child's services are subject to income tax withholding. But, payments for the services of a child under age 18 are not subject to social security and Medicare taxes, while payments to a child over age 18 are.
• Payments for the services of a child under age 21 are not subject to Federal Unemployment Tax (FUTA). Payments to children over 20 are.

When are business travel expenses deductible? Business travel expenses can be deducted when an individual must travel away from their tax home or main place of work for business reasons. An individual is traveling away from their tax home if they are away for more than an ordinary workday and they need to sleep to meet the demands of their work while away.

What is a tax home?  Generally, an individual's tax home is their regular place of business or post of duty - not their personal residence. The term "tax home" can include the entire city or general area where the individual's work or business is located.

The IRS has posted a webpage that alerts taxpayers to some issues to consider when operating a business as a married couple.  Employment tax requirements for family employees may vary from those that apply to other employees. 

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 U.S. Department of Education has officially launched a website accepting applications for student loan forgiveness.

Under the program, those with federally guaranteed student loans can have up to $20,000 of their eligible student loan debts forgiven, depending upon certain qualifying factors. Those who had also received Pell Grants, which are for lower-income students, can have up to $20,000 forgiven, while non-Pell Grant recipients can have up to $10,000 in debts forgiven.

Gig economy companies classifying their workers as independent contractors continue to face lawsuits, state action, and federal agency enforcement.

For much of the last decade, a legal and regulatory storm at the state and federal level has surrounded classification of workers as “independent contractors” or “employees.” The dramatic growth of the gig economy, especially app-based service such as Uber, Lyft, Door Dash, Instacart, etc. has contributed to the upheaval. Uber and Lyft have faced lawsuits across the country contending they misclassified their drivers as independent contractors rather than employees in violation of the Fair Labor Standards Act (FLSA) and similar, state wage and hour laws.

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.