Get your taxes done

If you still need to file your federal income tax return, get it done now so that you will be free to raise the roof for the FAIRtax on TAX DAY this year, Tuesday, April 18, 2023.

To help you finish your taxes, here is some of what's new for the 2022 tax year, which you are working on now. This article is not tax advice. Please consult a tax attorney, accountant, or another tax professional for your particular situation. This information comes from the IRS website.

1.      If you work in the gig economy, the rules for a “payment settlement entity”, like Venmo or PayPal, to report payments to you will change, but the IRS postponed the change. The old rule for 2022 is still that you will receive a Form 1099-K from a “payment settlement entity” for transactions only if the total number of transactions exceeds 200 for the year and the aggregate amount of these transactions exceeds $20,000. This year, 2023, the American Rescue Plan lowers the reporting threshold. For the return you will file in 2024, you should receive Form 1099-K for payments for all goods and services that exceed $600, regardless of the number of transactions. There will be more revenue agents to ensure you get your form.

You still must pay tax on all payments you receive to provide goods and services regardless of the reported amount on the 1099-K.

If you are not a “payment settlement entity,” you may still be on the hook to report payments for goods and services you make over $600 to any one person or entity. Check with your tax professional.

Under the FAIRtax, your payments for goods or services to an independent contractor are nobody else’s business as long as the recipient gives you a receipt breaking out the price of the good or service and the FAIRtax. If you are a household employing domestic help, you will have to set yourself up to pay FAIRtax, as you do today.
 
2.      Some tax credits are returning to lower 2019 levels, and affected taxpayers will likely receive a significantly smaller refund. For example, those who got $3,600 per dependent in 2021 for the Child Tax Credit will, if eligible, get just $2,000 for 2022. For the Earned Income Tax Credit, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 in 2022. In addition, the Child and Dependent Care Credit will return to a maximum of $2,100 in 2022 instead of $8,000 in 2021.
 
The FAIRtax addresses credits through the Prebate.  Under the FAIRtax, if Congress wanted to provide additional benefits to less affluent people, they could still do that.  But they’d have to do it out in the open with specific appropriations rather than clandestinely burying them in a massive tax code.

3.      The break you got in 2021 for charitable expenses, even if you took the standard deduction, is going away. During COVID, taxpayers could take up to a $600 charitable deduction on top of the standard deduction. However, for 2022, those who take a standard deduction may no longer take an “above-the-line” deduction for charitable donations.

With the FAIRtax, there will be no need for a charitable deduction because there is no tax base from which to take it. Instead, your charitable contributions will come from untaxed income.

4.      More people may be eligible for the Premium Tax Credit purchased through a Health Insurance Exchange. 
 
With the FAIRtax, the tax applies to health insurance premiums but not benefits. Employers who provide their employees' health insurance will pay tax on the premium. This rule will equalize the tax treatment of employer-paid and self-paid health insurance. The cost of health insurance premiums will raise the Prebate.

5.      Finally, eligibility rules have changed for the tax credit for clean plug-in vehicles. Generally, the rules are more restrictive.

The FAIRtax charges the same tax on new plug-in electric vehicles as on other tangible goods.  As you can with any other used tangible property, you can buy a used electric vehicle tax-free. If Congress then wants to subsidize electric vehicles, it is free to do so, but again, they’d have to do it out in the open with appropriations that all can see.  Congress can also decide to pay you overtly for a new electric vehicle. There will be no more surreptitious spending through the tax code.
 
6.      The income tax brackets and the standard deduction will self-correct for inflation. The standard deduction for 2023 grows to $27,700 for married couples filing together and $13,850 for single taxpayers. Six tax brackets are still starting at 12% and rising to 37%. Where they attach depends on your filing status.

With the FAIRtax, there are no income tax brackets because there is no income tax.

So, get your taxes done to free yourself up to act and support the FAIRtax. I would love to hear your plans for TAX DAY. AFFT Grassroots Coordinator & Secretary

 

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