The U.S. tax season is coming up, and new changes to the IRS code come that will affect employers and employees alike. Many of these changes are set to take effect in 2022, so this blog post will focus on what you can expect for the upcoming year.
Employers should start preparing now for the new changes to the tax code. One of the best ways to do this is by distributing forms and instructions to employees as soon as possible. Make sure you are up-to-date on all the latest changes so you can help your employees file their taxes correctly and receive the maximum refund possible.
Employers should keep an eye on the following changes to the tax code for 2022:
1. The pass-through deduction may be lowered or eliminated for those who qualify. This deduction allows business owners to deduct a portion of their income passed through from their company.
2. The corporate tax rate may be lowered, which would benefit larger businesses.
3. The estate tax exemption may be raised, meaning more people will pay this tax upon death.
4. The child tax credit may be increased, giving parents a larger break for each child.
Changes to Child Tax Credit Payments
To ensure that the needs of all taxpayers are met, families who receive advance payments for their child tax credits will need to compare them with what’s offered by law. Suppose an eligible family does not get monthly advances on time or at all. In that case, they still have a chance to file and claim this benefit when returning next year if it is greater than before receiving any future benefits from earlier years’ worth of contributions.
The wage base increases to $147,000 for Social Security and remains for Medicare.
Electronic Federal Tax Payment System (EFTPS)
Employers should pay their Federal Tax Liabilities through the Electronic Federal Tax Payment System unless they owe less than $2,500 in quarterly payroll tax liabilities and file an employment return (Form 941 or Form 944) with all required information.
The Fair Labor Standards Act requires households to report and pay federal income tax, Social Security Administration (FICA) for domestic workers at least 18 years old. In 2022 this applies if they make more than $2 400 in cash wages working in one household alone – not including any other employers’ homes where you may be employed during that time as well.
Recovery Rebate Credit Claims and Economic Impact Payments
The IRS seeks to provide relief for individuals who did not qualify or receive the full amount of their third economic impact payment. These lucky taxpayers may be eligible in some cases based on what they filed during tax season 2021-2022, with this credit being calculated by multiplying your final EIAP payments and any plus-up amounts you received when filing next year’s return. You must take immediate action as soon as possible upon receiving Letter 6475.
Be sure to check back later in the year for more tips on how to prepare for the U.S. tax season. In the meantime, if you have any questions, please don’t hesitate to contact us.