Pillars on a Government building

Lately on the Hill

All is quiet on the Hill as we’re only a few weeks away from midterm elections and legislators are spending their time fundraising and campaigning. In the meantime, the IRS has been busy releasing new guidance in preparation for the upcoming tax filing season and looking forward to 2023. 

  • The IRS released inflation-adjusted items for 2023 for various Code provisions including tax brackets and an increased standard deduction, making necessary adjustments to prevent “bracket creep,” which is a concept where taxpayers are pushed into higher-income tax brackets due to inflation instead of truly having an increase in income. Here are the 2023 tax brackets for unmarried individuals (other than surviving spouses and heads of households) and joint filers:
    • 37% for incomes over $578,125 ($693,750 for married couples filing jointly)
    • 35% for incomes over $231,250 ($462,500 for married couples filing jointly)
    • 32% for incomes over $182,100 ($364,200 for married couples filing jointly)
    • 24% for incomes over $95,375 ($190,750 for married couples filing jointly)
    • 22% for incomes over $44,725 ($89,450 for married couples filing jointly)
    • 12% for incomes over $11,000 ($22,000 for married couples filing jointly).
    • 10% for incomes up to $11,000 (up to $22,000 for married couples filing jointly)
  • The IRS also released limit increases for retirement-related items for 2023 in Notice 2022-55, and the Social Security Administration announced that the maximum earnings subject to Social Security tax will increase from $147,000 to $160,000 in 2023. 
  • In draft instructions for the 2022 Form 1040, the IRS provided further clarity to taxpayers on how to report cryptocurrency transactions on their tax return. As a reminder, the IRS once again re-worded this question on the Form 1040 to say: “At any time during 2022, did you (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?”
    • First, the IRS is now calling it “digital assets” versus “virtual currency.” This is in line with last year’s infrastructure bill terminology
    • Second, “financial interest in a digital asset” is noted to include having an ownership stake in an account that holds one or more digital assets, which is raising all sorts of questions needing further clarity for taxpayers and tax professionals.

IN CASE YOU MISSED IT

  • Republicans on the Senate Finance Committee sent a letter to the Government Accountability Office requesting a progress report on issues they asked the IRS to fix, especially considering the additional funding granted to the IRS under the Inflation Reduction Act. 
  • The IRS withdrew proposed 2006 regulations with guidance on the exclusion from gross income of previously taxed earnings and profits and related basis adjustments. 
  • The Treasury Inspector General for Tax Administration (TIGTA) wrote a memo to Treasury Secretary Janet Yellen with a list of the top challenges the IRS faces in 2023. The list includes things like improving taxpayer service, protecting taxpayer data and IRS resources, modernizing IRS operations, administering tax law changes, increasing domestic and international tax compliance and enforcement, and reducing tax fraud and improper payments. 
  • In a letter to Sen. Ron Wyden, TIGTA claims that nine taxpayers owe $11.7 billion in Section 965 tax repatriation payments (six individual taxpayers and three C corporations). It is now up to the IRS to determine how and when to recover the noncompliant payments.  
  • The IRS is reminding employers to file the next quarterly payroll tax return by the approaching October 31, 2022 due date, and urges taxpayers to do so electronically. Note, this filing deadline includes Form 720 for taxpayers subject to the reinstated Superfund excise taxes
  • The IRS is warning employers to beware of third parties promoting improper Employee Retention Credit claims. Some third parties are taking improper positions related to taxpayer eligibility for and computation of the credit, and often charging large upfront fees or a fee that is contingent on the amount of refund calculated by the third party.
  • Rep. Brendan Boyle wrote a letter to Congressional leaders requesting to get rid of the debt limit so that Republicans can’t use the debt limit to hold up future spending bills. The federal government is likely to reach its debt limit once again sometime in 2023.
  • An Eighth Circuit appeals court temporarily paused the Biden administration’s student loan relief plan as the court considers whether six Republican-led states have a case to block implementation of this program. In response, the White House said it will be proceeding with the program even as it awaits the court’s ruling.

This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein. 
 

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