Spring Tax Cleaning

Spring Tax Cleaning

 As is usually the case in mid-term years, all is fairly quiet on major tax legislation developments. But, there are still some tax-matters that you need to be aware of.

 Update on Expiring Tax Provisions

 While it is true that most of the Trump-era tax cuts don’t expire until 2025, there are a few temporary Covid-related tax savers that go away after 2022 and another that scales back.

 100% Business Meal Deduction Through 2022: We are all painfully aware that a full tax deduction is rarely ever available for business meals. This is especially painful for those who have a large M&E budget.

 Thanks to Congress’ effort to jump start the restaurant business hard-hit by Covid, Congress relaxed these rules to allows for 100% write-off in 2021 and 2022 for the full cost of business-related food and beverages purchased from a restaurant. The deduction is normally limited to 50% of the cost of the meal.

 How does a small business qualify for full 100% meal write-off?: A business owner or an employee of the business must be physically present. It should be noted that the definition of restaurants include establishments that provide meals or beverages to retail customers for on-premises or off-premises consumption.

Business Equipment Expensing: We report on this often and will continue to do so given its importance to small business. The full 100% bonus depreciation write-off for 2022 business equipment is still in effect, but it is scheduled to scale down in 20% increments after 2022.     

Given current economic conditions, this could be one that Congress either extends or leaves at full throttle for the time being.

Other Expiring Provisions: Other expiring provisions include incentives for biodiesel and renewable diesel as well as premium assistance credits on health coverage purchased through a government  exchange.

A comprehensive listing of expiring credits for 2022 and thereafter can be found at https://www.jct.gov/publications/2022/jcx-1-22/

Update on IRS Backlog Issues

Backlog of Unprocessed Returns: Still waiting on your tax refund? A common complaint that has been well-publicized is the problem of unprocessed tax returns resulting in held-up tax refunds and unresolved tax problems. The majority of these issues involve paper-filed Form 1040 series returns. As of April, the IRS reported that there were over 10 million unprocessed returns related to 2021 and 2022 filings, again mostly those filed by mail.

Where’s My Refund?: Speaking of refunds, for those with outstanding refund amounts, the IRS announced in late May that it has enhanced a tool on its website that allows you to see the status of the past three years refunds. You will need your social security number, filing status, and expected refund in order to track this information. It can be found at https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp

IRS Destroyed Paper Information Returns Due To Backlog: According to a report from the IRS, it destroyed 30 million unprocessed paper-filed information returns related to the 2020 filing season. Most of these were in the Forms W-2 and 1099 series and were destroyed mainly due to storage and technology issues.  These returns were primarily used to cross-check already filed returns.

Problems With the Recovery Rebate Payments: You will recall during the COVID crisis many received recovery rebate payments spanning over two years. To be sure, this was a monumental task with a short turn-around and worker shortage issues during the pandemic.

As was feared, based on a recent report from the Treasury Department, the IRS erroneously issued improper Recovery Rebate Credit payments totaling $898 million: $819 million to ineligible taxpayers and $80 million that should have been paid but wasn’t.

I Didn’t Receive My Rebate Credit. What To Do?: There’s good and bad news. At this point the IRS doesn’t have the workforce necessary to recover the erroneous payments or correct it for those who should have received the payment. If you believe you qualified for the payment, you can file an amended individual return to claim the credit for 2020 and/or 2021.