On January 23, 2023 the IRS began accepting and processing 2022 tax returns and is expecting more than 168 million individual tax returns to be filed this year. Unless they request an extension, Taxpayers need to have their returns filed by April 18 because the usual April 15 deadline falls on a Saturday and Washington, DC celebrates the Emancipation Day holiday on Monday, April 17. There are a number of changes that will impact the 2022 filing season.
Cryptoasset Scrutiny
The IRS updated the question on Form 1040 regarding a taxpayer’s cryptoasset transactions during the tax year. In 2021, the question stated “at any time during 2021, did you receive, sell, exchange or otherwise dispose of any financial interest in virtual currency?”. For 2022, the question reads “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)? The AICPA believes there is still potential confusion regarding how the question should be answered and has made comments and recommendations to the IRS about simplifying and providing guidance on the question.
Change to 1099-K Filing Threshold Postponed
The IRS has postponed the implementation of the 1099-K reporting threshold of $600, which was supposed to be effective for the 2022 tax year. Now postponed until 2023, the additional time will allow Taxpayers (and their advisors) to prepare to meet challenges related to complying with the new provision. Notably, Form 1099-K could reflect transactions besides those involving the provision of goods and services, such as for personal payments and charitable contributions. This will be of particular concern for clients in the gig economy as the new reporting may capture transactions that do not involve the provision of goods of services and therefore, are non-taxable.
Research and Development Expenditure Amortization
Enacted by the Tax Cut and Jobs Act passed in December 2017, the new law requires taxpayers that incur research and development (“R&D”) costs to amortize them over five years, or 15 years if the expenditures related to foreign research. Prior to 2022, taxpayers could treat R&D expenses in 4 ways: (1) they could currently deduct the costs; (2) they could capitalize them and then amortize the costs over a period of not less than 60 months; (3) if the costs were neither treated as a current deduction nor amortized over 60 months, then taxpayers could charge them to capital account under Treasury Reg. 1.174-1; or (4) they could capitalize and amortize certain expenditures ratably over a 10-year period pursuant to IRC 59(e).
Please contact your trusted advisor at Reese Henry & Company if you have any questions or concerns about these provisions.