Navigate tax season with these resources for accountants

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Planning for 2023 tax filings: What’s new for individuals?

Planning for 2023 tax filings: What’s new for businesses?

Tax provisions and incentives for businesses

Resources for the 2023 tax season

In January 2023, the IRS launched the Information Returns Intake System (IRIS) in accordance with The Taxpayer First Act (TFA). Now, all taxpayers can file all 1099 series forms via this platform. The Filing Information Returns Electronically (FIRE) system remains available for bulk filing of Form 1099 series and the other information returns through at least the 2023 filing season.

That’s just one change accountants must be aware of when working with personal or business tax returns. In this post, we will explore a few of these changes and point accountants to resources in the links to help you navigate the 2023 tax return season.

Planning for 2023 tax filings: What’s new for individuals?

Two main updates for individuals include:

• • Many of the tax benefits related to the COVID-19 pandemic have expired or reverted to their pre-pandemic levels, but expanded health insurance subsidies are extended through 2025.
  • The SECURE 2.0 Act (the “Act”) that was passed on December 29, 2022, introduced some key retirement provisions: Expanding automatic enrollment in retirement plans; increasing the age for the required beginning date for mandatory distributions; a higher catch-up limit to apply at age 60, 61, 62, and 63; and the elimination of the additional tax on corrective distributions of excess contributions.

Starting in 2023, the required beginning date for mandatory distributions will increase and the 10% early distribution tax rule will be modified for firefighters and public safety officers.

If a firefighter or long-term employee terminates employment after age 55 and takes a distribution from a retirement plan, the 10% early distribution tax does not apply. However, there is a special rule for “qualified public safety employees” in governmental plans, under which age 50 is substituted for age 55 for purposes of this exception from the 10% tax. This exemption applies to public-sector firefighters but not private-sector firefighters.

The Act extends the age 50 rule to private sector firefighters. In addition, the Act extends the exception to public safety officers with at least 25 years of service with the employer sponsoring the plan.

Planning for 2023 tax filings: What’s new for businesses?

The Taxpayer First Act also contained a provision that permitted the IRS to issue regulations to reduce the 250-return threshold that triggers the electronic filing mandate of wage statements and information returns.

The IRS released final regulations in February 2023 that reduced the e-filing threshold mandate from 250 returns of a single type of information return to 10 information returns in aggregate for the 2023 tax year (2024 filing year). This will trigger more electronic filing in the 2024 processing year. Payroll-related forms impacted by the reduced threshold include:

• • • Form W-2
    • Form 1099 series, including Form 1099-NEC, 1099-MISC, and 1099-
    • Affordable Care Act returns, including Form 1094 series, Form 1095-B, and 1095-
    • Forms 3921 and 3922
    • Form 5498
    • Form 8027

The 2024 ACA affordability percentage for employers to avoid employer-shared responsibility payment (ESRP) is 8.39% (a decrease from 9.12% in 2023). Effective January 1, 2023, the affordability percentage applies to family plans that cover the employee and family members rather than just self-only coverage.

For plan years beginning in 2024, the maximum amount that may be made newly available for the plan year for an excepted benefit health reimbursement arrangement (HRA) is $2,100.

Tax provisions and incentives for businesses

The landscape of business taxation is perennially evolving, and 2023 is no exception, with significant tax provisions and incentives at play that can influence a company’s financial strategy.

This year, businesses must navigate the reduction of first-year bonus depreciation, adapt to changes brought about by the Inflation Reduction Act, and optimize the deductions available through the Qualified Business Income (QBI) stipulations.

These elements, among others, present both challenges and opportunities that can substantially affect a business’s tax liability and overall fiscal health. As we delve deeper, we will dissect these critical tax components, equipping businesses with the knowledge to harness these provisions to their advantage.

Bonus depreciation

For 2023, a first-year bonus depreciation deduction falls to 80% of the adjusted basis of depreciable property allowed for qualified property acquired and placed in service during the year. Qualifying property includes:

• • • Tangible property depreciated under a modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less
    • Most computer software
    • Qualified film, television, and live theatrical productions
    • Water utility property.

Businesses may want to defer placing bonus-depreciation-eligible property into service until next year or opt out of bonus depreciation on their tax return for this year because of possible higher tax rates next year. However, taxpayers should remember that under current law, the bonus depreciation deduction falls to:

• • • 60% for property placed in service in 2024
    • 40% for property placed in service in 2025
    • 20% for property placed in service in 2026
    • 0% for property placed in service in 2027

Inflation Reduction Act

Two changes made by the Inflation Reduction Act of 2022 became effective on January 1, 2023:

• 1. A 15% corporate alternative minimum tax will apply to corporations with an average annual adjusted book income of over $1 billion for three consecutive years.
  2. The second change is a 1% corporate stock buyback excise tax. This tax applies to corporations with stock traded on an established securities market that repurchases more than $1 million of stock over a tax year. In late 2022, the IRS issued a Notice providing interim guidance on the operation of the tax. In June 2023 it was announced that taxpayers would not be required to report or pay the stock repurchase tax before the IRS issues regulations.

Through 2025, eligible taxpayers can deduct up to 20% of qualified business income (QBI) from a domestic sole proprietorship, partnership, S corporation, trust, or estate, and up to 20% of the combined qualified real estate investment trust (REIT) dividends and publicly traded partnership income (PTP) of the taxpayer.

The combined deduction cannot exceed 20% of the excess of the taxpayer’s taxable income over net capital gain for the year.

For 2023, specified service businesses qualify for the QBI deduction if their taxable income is less than $182,100 for single and head-of-household filers, $364,200 for joint filers, and $182,100 for separate the deduction phases out over the next $50,000 of taxable income over the thresholds ($100,000 phaseout for joint return filers).

For 2023, the deduction totally phases out at $232,100 for singles, heads of household, and married separate filers and $464,200 for joint filers for 2023. (For 2024, it is projected to be $241,900 for singles, heads of household, and separate filers and $483,850 for joint filers).

Resources for the 2023 tax season

The 2023 tax season brings several changes for both individuals and businesses.

From the launch of the Information Returns Intake System (IRIS) to the reduction of the first-year bonus depreciation, it is important for accountants to stay informed and up-to-date. The landscape of business taxation is constantly evolving, and this year is no exception.

By being aware of these changes, individuals and businesses can better navigate the tax season and optimize their financial strategy.

Utilize our resources below and navigate this tax season with success!

White paper Tax season is here: How to help ensure success Tax season can be a stressful and challenging time for tax professionals and their clients. With complex and changing tax laws, tight deadlines, and high expectations, tax professionals need to be prepared for anything. But how can you ensure a successful tax season for your practice and your clients?