What to know about filing your taxes in 2023.
Tax filing season for millions of Americans is fast approaching, and there’s no better time to start preparing. As you begin to receive W-2s, 1099s and other annual tax-related documents in your mail or inbox, it’s also a good time to familiarize yourself with some important changes that might impact your 2022 tax return.
Here’s what’s new and what to consider as you prepare to file your taxes in 2023.
Claiming cryptocurrency transactions on your tax return
The Internal Revenue Service (IRS) views cryptocurrency as property, so any gain or loss related to your asset is considered a taxable event. If you bought, sold or accepted cryptocurrency as a form of payment in 2022, it’s important to understand how the IRS views the transaction and what counts — and doesn’t count — as a taxable event.
“The IRS is increasing its focus on ensuring investors properly report crypto activities and pay necessary taxes,” explains Alejandra Berra, CFP, lead crypto strategist at Commerce Bank. “Individuals should keep this in mind, remembering that cryptocurrency tax situations are nuanced and may be more complex based on the transaction.”
You might face capital gains or losses, which may be short-term or long-term, similar to other investments taxed by the IRS, like stocks and bonds. These rules don’t apply to cryptocurrency in a retirement account, if you’re transferring crypto between wallets or if you make a gift (up to $15,000 per person) or charitable donation using cryptocurrency.
Which tax forms should you use for cryptocurrency — and where can you find them?
How you report cryptocurrency on your taxes depends on the type of account and type of transaction. Tax forms you may need to complete can include Form 1040, Schedule D, Form 8949, Schedule C or Schedule SE. You can find these forms and instructions on the IRS website.
You may receive 1099-B forms from cryptocurrency exchanges you interact with, but the exchanges aren’t required to send the forms until tax year 2023. It’s a good idea to keep records of all your cryptocurrency activity so you can be prepared at tax time, in case you don’t receive the documents you need by the time you’re working on your taxes. Berra adds that it’s important to keep track of your crypto holdings and activity throughout the year to help you manage your tax liability and save you time when filing.
IRS delays new reporting guidelines for third-party payment platforms
You may have heard the news that anyone who earned income of $600 or more in 2022 and was paid though a third-party platform like Venmo, PayPal or eBay would receive 1099-K forms starting in early 2023. While earners are still required to report all taxable income to the IRS, the implementation of the 1099-K changes has been delayed. You can find more information from the IRS about form 1099-K.
Other changes that may impact your tax refund
Consider any life changes you experienced during the past year that may affect your filing status, credits or deductions. These can include getting married or divorced, a change in dependents, buying or selling a home, selling a business or a change in employment.
Here are some other changes to be aware of:
- The standard deduction increased over last year. You may want to review your financial activity from 2022 to determine whether it makes sense to take the standard deduction or itemize expenses. For the 2022 tax year, the standard deductions are:
- Single or married individuals filing separately - $12,950
- Married couples filing jointly - $25,900
- Head of household filers - $19,400
- Tax credits for filers claiming the Child Tax Credit, Earned Income Tax Credit and Child and Dependent Care Credit are returning to 2019 pre-COVID rules. This means impacted taxpayers will likely get a smaller refund compared to previous years.
- Charitable contribution limits have also returned to 2019 pre-COVID rules, which means filers need to itemize in order to claim a charitable deduction.,
- Some tax credits related to the 2022 Inflation Reduction Act, such as the clean vehicle and clean energy credits, are available to claim now. Others will be available in the near future. Learn more about claiming electric vehicle tax credits and clean energy tax credits.
- Overall, tax filers may see smaller refunds since there weren’t any stimulus payments distributed in 2022. However, you may still be able to lower your tax bill by making contributions to certain tax-advantaged retirement plans for tax year 2022 through April 17, 2023.
You may also want to take steps now to help lower your 2023 taxable income. Start by reviewing your W4 withholding amount to confirm that you’re having enough tax withheld from your paychecks. Contribution limits to tax-advantaged accounts like 401(k), IRA and health savings accounts are increasing in 2023, so you may be able to take advantage of saving more for the future while enjoying a tax break.
Take advantage of resources for easier tax filing
Preparing in advance by reviewing tax changes can make tax filing faster and easier. Filing electronically and signing up for direct deposit can also speed up return processing and refunds. You may want to schedule an appointment with your financial advisor or tax advisor who can answer your questions, keep you informed and help ensure that you’re claiming all the credits and deductions you’re entitled to. You can also find information and resources for filing your 2022 tax return on the IRS website.
Commerce does not provide tax advice to customers. Consult a tax specialist.
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