In late August, President Biden issued an executive order allowing for up to $10K of student loan forgiveness on loans from federal government lenders and up to $20K of forgiveness for Pell Grant recipients (for single taxpayers with incomes up to $125K and couples to $250K) . The legality of this action has been contested by Republicans and the Supreme Court has now agreed to hear the case, although it is not expected to be heard before February. Many feel that the conservative makeup of the current Supreme Court will strike down the student loan forgiveness.

Even if the student loan forgiveness is allowed, my North Carolina clients will likely still have to pay NC taxes on the forgiven amount (example - roughly $500 in NC taxes if $10K is forgiven - this would be a 2023 transaction).

As part of the continuing efforts of the IRS to track money flows within our economy in order to enforce the tax laws, the 1099-K form was enacted in 2012 to require banks and credit card processors to report all payments above a certain threshold amount ($20K as of 2021 or at least 200 transactions). As part of the American Rescue Plan Act, the threshold was dropped all the way down to $600 starting in 2022 with no minimum for number of transactions. This is part of an effort to improve enforcement of reported income in the new "gig economy" where more workers are self-employed.

This change has been debated among politicians, especially with the sharp rise in the use of "third party settlement organizations (TPSO's)" such as Paypal, Venmo, Zelle, Square and the Cash app. While these vendors generally allow users to indicate whether a transaction is business-related or, for example, just a personal money transfer among friends, there is a concern that the $600 threshold will cause many taxpayers to receive 1099-K forms related to personal transactions (example - people splitting the check at dinner, etc. where they forget to check the box as a personal transaction). These amounts would obviously not be indicative of some type of side income that needs to be reported to the IRS, however they would need to be addressed on the tax return due to the 1099-K form issuance.

In the past week, the IRS issued Notice 2023-10 which will extend the transition period to the new standard and that 2022 transactions will not be subject to the new $600 threshold (the old $20K or 200 transaction threshold remains for 2022).

Several tax credits and deductions that came about during the pandemic will revert back to previous levels with 2022 tax returns:

• the Child Tax Credit (CTC) will revert back to $2,000 per child
• the Child & Dependent Care credit returns to maximum of $2,100
• the Earned Income Tax Credits (EITC) where one received $1,500 goes to $500
• the charitable contribution deduction of up to $600 for those who claim the standard deduction has been removed for 2022

Tax law changes for 2022 include a significant increase in incentives for purchasing a qualified electric vehicle. Tax credits under the Inflation Reduction Act (IRA) for electric car purchases include up to $7500 for a new vehicle and $4,000 for a used electric vehicle. However, there are requirements that the vehicle must be assembled in North America to qualify for the tax credit. Here is a link to a preliminary list of qualifying vehicles:  https://electrek.co/2022/08/16/ev-tax-credit-list-of-cars-eligible-7500-inflation-reduction-act/

The recently passed Omnibus Spending Bill that is now moving from Congress to President Biden's desk includes several provisions that will impact the retirement savings process going forward (effective for 2023 and beyond).

The age requirement for Required Minimum Distributions (RMD's) will rise again from 72 to 73 on January 1, 2023 and later go up to 75 in 2033. Starting in 2025, businesses will now be mandated to automatically sign up new employees in their employer-sponsored retirement plan (if one is offered) as part of the onboarding process. New hires can opt out if they wish. Starting in 2024, the amount of "catch up" contributions to a retirement plan allowed for older savers will increase. The bill includes several other provisions to promote retirement savings.

As 2022 comes to a close, there are several year end tax strategies that may be a good fit for you.

Many taxpayers have investments that have unrealized capital losses (including crypto investments). Consult with your investment advisor regarding the long term prospects for these investments as you may want to sell and take the tax loss for some investments, known as "harvesting" your tax losses. Also be careful regarding the purchase of mutual funds late in the year that are paying out dividends and capital gains built up during the year (or prior years) which could impact your taxes due.

Don't forget that for 2022, you can gift any other person up to $16K without having to pay gift tax or file a gift tax return. This amount goes to $17K for 2023.

Some taxpayers can benefit by "bunching" itemized deductions into one tax year if it creates enough itemized deductions to exceed the standard deduction. Your tax advisor can assist with an analysis of your situation.

Looking ahead to 2023, note the discussion of 1099-K form changes above and that the threshold change to $600 is currently scheduled to take effect for 2023. If you have a personal money transfer through a TPSO such as Paypal, Venmo, Zelle, Square and the Cash app, make sure the transaction is flagged as personal. If you sell personal property through channels such as eBay and receive more than $600 in payments through a TPSO, you will likely receive a 1099-K form for 2023 which must be addressed on your 2023 tax return. Save yourself (and your tax preparer) a future headache by making sure that payment transactions are properly categorized between personal and business, plus keep records if you have engaged in a transaction which must now be reported.

For 2023, several tax-related limits will rise including the pre-tax contributions to workplace 401(k) accounts from $20,500 to $22,500, catch-up contributions (for those over age 50) from $6,500 to $7,500, and IRA contributions from $6,000 to $6,500. Caps on retirement plans for the self-employed will also increase.