Most of the Covid Era credits and deductions are set to expire at the end of this year. Barring additional legislation, the following will become a thing of the past.
1 – Expanded Child Tax Credit
The credit of up to $3,600 per qualifying child will revert back to $2,000 with only $1,400 of that being refundable at the end of this year.
2 – Expanded Earned Income Tax Credits
The law almost tripled the allowable credit per qualifying child and expanded the eligibility base. This also ends on New Years Eve.
3 – Expanded Child and Dependent Tax Credit
The current expense limits of $8,000 and $16,000 revert to their original limits of $3,000 and $6,000 at the end of the year.
4 – Above The Line Charitable Contributions
This popular $300 or $600 deduction ends on December 31st.
There are another 25 tax provisions set to end with this coming tax season, We’ll see whether or not any of these are extended.
One thing is certain. Refunds are going to change dramatically on the 2023 returns if nothing happens.
Let me leave you with this.
It’s obvious that the President’s tax agenda hinges on the midterm elections. If the new administration’s party loses either the senate or the house, the current wave of tax policy will certainly end.
The president campaigned on raising taxes on higher income taxpayers and large corporations. He also promised increased credits for lower income families.
The part that’s new was the additional billions of dollars that he’s thrown at the IRS to increase the amount of audits on wealthy taxpayers and to decrease the backlog of unprocessed returns. The problem is that no one can magically begin by only auditing taxpayers in excess of $400K annually.
They don’t have the money to hire experienced people, so their auditors will need to be trained. At first they’ll handle audits on lower income taxpayers, then as they learn more, they’ll handle middle income taxpayers, and so on.
Of course, many of those auditors won’t progress at all, and will end up staying at the lower or middle class taxpayer level. As such we’ll have a lot more audits to handle as a result of the legislation.
As mentioned before, the majority of the Covid Era tax credits are ending this year. Whether or not they’re extended will also probably hinge on the midterms.
Only time will tell where any of this will end up but I will promise you one thing. Your vote will matter this fall. There’s a lot riding on it.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions LTd. stands ready to complete our mission and purpose of protecting you, your family, and your business whether you need EMployee Retention Credits, M&A Due diligence, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
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