Are you ready for the upcoming tax season? As we enter into 2022, there are a number of key updates and changes made by the Internal Revenue Service (IRS) that you need to know about. Keeping yourself informed about these updates can help you to avoid penalties and make the necessary adjustments to your financial planning. Here are some of the key IRS updates that you shouldn’t miss out on in 2022:
1. Inflation Adjustments
One of the important updates to take note of is the inflation adjustments made by the IRS on various income tax schedules, provisions, and deductions. Taxpayers would be pleased to know that the inflation rate has been low, which means they will enjoy some tax relief in 2022. For instance, the standard deduction for Individuals and married couples filing jointly has increased for the upcoming tax season. The standard deduction for single filers is now $12,950, a $150 increase from the previous tax year. For married couples filing jointly, the standard deduction has gone up to $27,400, while for head-of-household filers, the standard deduction is $19,350.
2. Retirement Plans
Another key update from the IRS is focused on retirement plans. From 2022, the contribution limits for various retirement plans available would be adjusted based on inflation. The contribution limit for 401(k) plans, for example, is now $20,500, an increase of $1,000 from the previous year. For individual retirement arrangements (IRAs), the overall contribution limit has also been adjusted to $6,000.
3. Child Tax Credit and Earned Income Tax Credit
The IRS has introduced some significant updates to these two tax credits for 2022. The child tax credit has been redefined, and eligible families would now receive an additional $1,000 per child. This means that the maximum credit amount is now $2,000 per qualifying child. The earned income tax credit (EITC) has also been modified, with the income threshold for qualifying raised to $16,240. Furthermore, the eligibility rules for qualifying children have also been revised.
4. COVID-19 Relief Measures
The IRS has also made some updates regarding COVID-19 relief measures. For taxpayers who have to pay Social Security payroll taxes, there is some good news to take note of. From 2022, there will be a temporary suspension of these taxes, which means more money in your pockets during this trying time.
These are just a few of the updates that taxpayers need to be aware of for the upcoming tax season. Understanding these updates can help you to avoid penalties and fines while also taking full advantage of updated provisions that may benefit you. It’s highly recommended that you seek the aid of a tax professional or accountant to help you navigate these guidelines and assist you with your financial planning.
In conclusion, by keeping abreast of the latest IRS updates and changes, you can ensure that you are not missing out on any key tax information while also making the necessary adjustments or planning to enjoy tax relief. With the above-discussed changes in hand, you can be better equipped to take on the coming tax season with confidence.
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