It’s that time of year to get ready for tax season, and there are some new provisions for 2023 to keep in mind.
As of January 1, 2023, employees can designate contributions to SIMPLE IRAs and simplified employee pension (SEP) plans as Roth contributions, making them nondeductible for tax purposes.
The American Rescue Plan Act of 2021 (ARPA), P.L. 117-2, introduced a change that will lead to an increased number of Forms 1099-K, specifically for Payment Card and Third-Party Network Transactions.
The threshold for third-party payment settlement entities to issue an annual Form 1099-K has been significantly lowered, now requiring reporting for an aggregate gross amount of $600 in receipts, with no minimum transaction threshold. This is a notable reduction from the previous requirement of $20,000 in gross receipts and more than 200 transactions. The IRS has provided a Fact Sheet (2023-06) with frequently asked questions about the form, available since March of this year: https://www.irs.gov/pub/
Effective January 1, 2023, the standard mileage rate for deductible business travel has risen to 65.5 cents per mile, marking an increase from the 62.5 cents per mile observed in the second half of 2022.
The bonus depreciation deduction, which was previously 100% of the eligible property’s cost when placed in service in 2022, has now decreased to 80% for assets placed in service in 2023. Additionally, there are scheduled further reductions: 60% in 2024, 40% in 2025, 20% in 2026, and no deduction from 2027 onward.
Starting in the tax year 2023, the following limits apply: the maximum aggregate cost eligible for expensing is $1,160,000. This amount is reduced by the cost of qualifying property placed in service during the tax year that exceeds $2,890,000.
As of January 1, 2023, the annual gift tax exclusion, which represents the amount that can be gifted without utilizing the basic exclusion amount, has been raised to $17,000 per donee.
Reach out to our tax professionals with Anderson, Adkins & Company at 706-288-200 or to get ready for tax season. As always, we are happy to help.