Tax

Taxpayers in 21 states, in including Georgia, may want to consider filing amended returns if certain disaster relief and general welfare payments were reported as taxable income on the 2022 federal tax return. On February 10, 2023, the IRS announced that “in the interest of sound tax administration and other factors,” those who received these payments are not required to report it as taxable income. This announcement is welcome news for Atlanta taxpayers that were unsure whether certain state tax refunds needed to be included as income.

For the last few years, the IRS has been plagued by several issues which have not only resulted in return processing delays but also a decline in customer service. It started when the IRS had to shut down onsite operations, which included activities at mail processing facilities. This meant returns and other communications could not be acted on causing an increase in taxpayer communication and processing delays. In addition, the shutdown also disrupted enforcement activities because of limited access to mail, fax, and print services. Once restrictions were lifted, inaccurate or outdated notices were erroneously sent out creating even more confusion. In fact, the situation was so bad the agency stopped sending any notices until the backlog could be cleared.

Despite the recent drop in cryptocurrency trading, it remains a popular investment option for those seeking diversification from traditional investments. The decentralized structure allows assets to be transferred relatively quickly, anonymously, and across borders without involving banks, regulators or incurring fees. The unusual format has caught the attention of the IRS which continues to introduce new regulations to identify and tax certain transactions.

The federal Research & Development (R&D) tax credit has been an important savings tool leveraged by businesses since it’s inception in 1981. While it has been modified to permit broader access, the incentive has helped thousands of companies offset the cost of eligible activities. A key aspect of the credit is the ability to claim and deduct eligible expenses in the year incurred. This not only allows companies to experience immediate savings, but provides the funds needed to maintain, or even expand, research activities. In other words, the credit has long been an important savings tool for many engaged in innovation.

On March 8, 2023, the Biden Administration released the proposed Budget of the U.S. Government – Fiscal Year 2024. The document outlines the President’s spending priorities for the coming year, details policy objectives, and detailed descriptions of how the changes will impact each Department, starting with Agriculture and concluding with the Social Security Administration. Buried deep in the long document are important updates and changes to the Internal Revenue Code (IRC) including tax incentives, tax rates, and the addition/extension of certain tax benefits.

The Research & Development (R&D) tax credit can provide significant savings to businesses conducting eligible activities. It has become an attractive tax incentive as over the last 15 years the number of companies claiming the credit has almost doubled. It may come as no surprise that the opportunity to deduct eligible expenses in the year incurred is one compelling reason. Unfortunately, changes made in the Tax Cuts and Jobs Act (TCJA) now require eligible research expenses claimed under Section 174 need to be capitalized and amortized. In other words, taxpayers can no longer capture immediate savings. Concurrently, businesses are also required to make a change of accounting method to comply with these new rules.

While retirement has long been considered a time for rest, relaxation, and rejuvenation, the unfortunate reality is this may be out of reach for many. Although there are many contributing factors exacerbating the situation, it appears that lack of workplace retirement plan coverage is the main cause. Without employer-matching contributions, it is difficult for most workers to accumulate retirement savings. Given this, it is no surprise that 22% of Americans have less than $5,000 saved and 15% have nothing saved at all. This alarming trend has prompted Congress to act by making additional retirement plan reforms. Despite this, it may be several years before the full benefits of the SECURE Act 2.0 are realized.

The 2023 filing season for Georgia state income taxes officially began on February 1. While returns are being accepted for last year, there are several new tax credit programs in effect for 2023 and beyond. In addition to updates for the standard deduction and online sellers, new tax credits are available for donations supporting various programs. This includes the Qualified Law Enforcement Donation Credit, Qualified Foster Child Donation Credit, and the Georgia Heart Hospital Program.

The appeal of electric vehicles (EVs) is one that attracts the attention of organizations, families, and individuals. The combination of reduced maintenance expenses due to fewer mechanical parts (no spark plugs, no oil changes, and regenerative braking) lower operating costs. Beyond practical savings, many buyers are also attracted by the federal tax credit of up to $7,500 for eligible EVs. Taken together it is easy to see why EVs have become so popular. To demonstrate this point, a survey found that in Atlanta alone, there are 36,000 registered EVs, with 1,100 charging stations available across the metropolitan area.  

The Taxpayer Advocate Service (TAS) released its annual report in January 2023. It provides a detailed analysis of the significant progress the agency has made in reducing the backlog of returns and the top problems as well. This includes challenges with processing delays, agency hiring and training, transparency, and a troubled appeals process. TAS is a nonpartisan, independent organization within the IRS that advocates for and supports taxpayers. Its 2023 report contains summaries of the most important issues in the fiscal year 2022 and recommendations for changes to improve the taxpayer experience.