Don’t Forget These Tax Changes as You Prepare Your 2022 Returns

Tax Day is about two months away, and there are some changes taxpayers need to be aware of—ranging from this year’s filing deadline to tax breaks that have expired or shrunk.

---

---

As a result of numerous changes, many people may be surprised by getting smaller refunds for 2022. Others who had been expecting a refund may discover that they owe money for last year, depending on their individual situations and what they did with their withholdings.

But some changes will benefit most taxpayers. The basic standard deduction amounts for 2022 are higher. Typically, it’s $12,950 for singles or married people filing separately, $25,900 for joint filers or a qualifying surviving spouse, and $19,400 for head of household. There are additional amounts for those 65 or older, for blindness, or for certain other factors.

Here are answers to questions readers may have about some of the new wrinkles that affect returns for the 2022 tax year.

Why is this year’s filing deadline April 18 for most of us?

This year, April 15 falls on a Saturday. Monday, April 17, is the Emancipation Day holiday in Washington, D.C. That means most taxpayers have until Tuesday, April 18 to file their returns, whether or not they live in Washington, D.C.

But there are important exceptions. For example, the IRS has approved later deadlines for millions of people in places hit by natural disasters and where those places were designated as federal disaster areas. “Disaster extensions—technically postponements—are something people get, even without asking,” says Eric Smith, an IRS spokesman. “So it’s truly automatic, and you get more time to both file and pay.” Among these are many Californians in areas hit by severe storms, flooding, landslides and mudslides that began late last year. They have until May 15 to file various individual and business tax returns and make tax payments. Parts of Alabama and Georgia also have until May 15 to file, Mr. Smith says.

See the IRS website for more details of these and other disaster declarations. And be sure to check the site regularly for updates.

If you have a casualty loss from a federally declared disaster. you can choose to deduct it on your return for that tax year—or for the tax year  immediately preceding the disaster year. If it’s more beneficial to deduct it for the preceding year and you’ve already filed for that year, consider filing an amended return. This isn’t new but it’s so counterintuitive that many taxpayers may not be aware of it.

For details on how to get six-month filing extensions, go to IRS.gov/Extensions. “Most extensions are now requested electronically,” says Mr. Smith. 

Are there tax breaks that haven’t been renewed or have changed for the 2022 tax year?

Yes, especially since Congress didn’t extend the life of certain breaks designed to provide relief during the pandemic. For example, the child tax credit is significantly less generous for 2022 than for 2021 because certain enhancements weren’t extended for 2022. The credit amount for 2022 is $2,000 for each qualifying child under 17. That’s down from the credit for 2021 of $3,600 for children age five and under and $3,000 for children ages six through 17. Other changes include lesser amounts for child- and dependent-care tax breaks.

Taxpayers who claim the standard deduction for 2022 can’t deduct any charitable donations they made during 2022, says Mark A. Luscombe, principal analyst at Wolters Kluwer Tax & Accounting. That’s different from the rules for returns for 2020 and 2021, Mr. Luscombe says. For those two years, taxpayers who claimed the standard deduction could also deduct up to certain amounts of their cash donations—such as cash, checks or credit cards—to qualified charities. (Some details for the 2021 tax year differed from 2020.) 

Moreover, Congress didn’t renew a suspension of certain charitable-deduction limits that had enabled itemizers to donate and deduct a much larger share of their income than they could previously. The IRS also points out that taxpayers “will not receive an additional stimulus payment with a 2023 tax refund because there were no (federal) Economic Impact Payments for 2022.”

What are some other new twists?

The IRS recently issued long-awaited guidance on the taxability of special payments that millions of people in 21 states received last year to provide help with issues related to such problems as inflation or the pandemic. 

The gist of the IRS decision: Most taxpayers don’t have to report these payments as income on their 2022 tax returns. In its Feb. 10 announcement, the IRS said it won’t challenge the taxability of payments “related to general welfare and disaster relief.” But there are tricky nuances that might require some recipients in a few states to report the income, Mr. Luscombe says.

The IRS said that people in the following states don’t need to report these state payments on their 2022 tax returns: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska is in this group as well. But the IRS announcement also includes additional nuances and footnotes. 

In addition, the IRS said many people in Georgia, Massachusetts, South Carolina and Virginia also won’t include the state payments in income for federal tax purposes “if they meet certain requirements.”

For more, see the IRS announcement and look at another IRS site on state-by-state payments.

Even with the nuances, this is “generally good news” for most recipients, says Claudia Hill, owner of Tax Mam, a tax-services firm in Cupertino, Calif., and an enrolled agent. (Enrolled agents are tax experts qualified to represent taxpayers at all levels of the IRS.) 

One note: Early birds who already have filed this year and who reported those payments will have to decide whether it’s worth the time, expense and hassles to fix those returns.

I worked for more than one employer last year. How do I know if my employers withheld too much in Social Security tax from my pay? If so, what should I do?

The annual limit on how much of your wages were subject to Social Security tax last year rose to $147,000, from $142,800 for 2021. (For 2023, it’s $160,200.) So, check to see if your total wages from all your employers last year exceeded $147,000, says Mary B. Hevener, a partner in the Morgan Lewis & Bockius law firm. 

The maximum amount of Social Security tax that should have been withheld was $9,114 (6.2% of $147,000), Ms. Hevener says. If more than that was withheld, you may be eligible for a credit on your return for the excess amount, the IRS says. If any one employer withheld too much Social Security tax, “you can’t claim the excess as a credit against your income tax,” the IRS says on its website. Your employer should adjust the excess for you. If the employer doesn’t adjust the overcollection of the Social Security tax, you can use Form 843, Claim for Refund and Request for Abatement, to claim a refund. For more, see the IRS’S Tax Topic No. 608 at irs.gov.

I’ve read that the IRS is facing major backlogs in processing returns from prior years. Should I delay filing for 2022 if I think my return for 2021 or some previous year hasn’t yet been processed?

No, says the IRS’s Mr. Smith. “If you have a return for 2021 or any other year that is still being processed, you should absolutely not wait to file your 2022 return,” he says, “especially if you have everything in order and are ready to do so.” Mr. Smith adds that “each year’s return is processed separately. So what may or may not happen for 2021, or any other year, has no bearing on what will happen on a 2022 return.”