For many taxpayers, dealing with the Internal Revenue Service (IRS) can be scary, especially if you are the subject of an IRS tax investigation. If an IRS special agent contacts you regarding an IRS tax investigation, it implies there is some evidence that you may have fallen foul of the tax code. In such situations, it always helps to hire a tax resolution attorney to assist you in finding a resolution. However, the first step to IRS problem resolution is to avoid them altogether by staying updated with the changes in the Tax Code. In this blog, we are going to look at the recently announced modifications to the tax code for the fiscal year 2022.
Increase in the standard deduction
Depending on how you file your federal tax return in 2022, the standard deduction will increase. According to the IRS, the following are the new figures:
- The standard deduction for married couples filing jointly has increased to $25,900, up $800 from the previous year.
- The standard deduction for single taxpayers and married individuals filing separately will increase to $12,950 in 2022, an increase of $400.
- For the tax year 2022, the standard deduction for heads of households will be $19,400, an increase of $600.
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Changes in tax brackets
The IRS has adjusted the tax brackets for 2022. It determines how your income will be taxed after you have taken the standard deduction and any other itemized deductions or tax breaks.
If you are filing jointly with your spouse:
- 10%: Taxable income up to $20,550 (up from $19,900 in 2021)
- 12%: Taxable income between $20,550 and $83,550 (increased from $19,900 to $81,050 in 2021)
- 22%: Taxable income between $83,550 and $178,150 (up from $81,050 to $172,750 in 2021)
- 24%: Taxable income between $178,150 and $340,100 (increased from $172,750 to $329,850 in 2021)
- 32%: Taxable income between $340,100 and $431,900 (up from $329,850 to $418,850 in 2021)
- 35%: Taxable income between $431,900 and $647,850 (increased from $418,850 to $628,300 in 2021)
- 37%: Over $647,850 in taxable income (increased from $628,300 in 2021)
For single taxpayers:
- Taxable income up to $10,275 (up from $9,950 in 2021): 10%
- Taxable income between $10,275 and $41,775 (increased from $9,950 to $40,525 in 2021): 12%
- Taxable income between $41,775 and $89,075 (increased from $40,525 to $86,375 in 2021): 22%
- Taxable income between $89,075 and $170,050 (increasing from $86,375 to $164,925 in 2021): 24%
- Taxable income between $170,050 and $215,950 (rising from $164,925 to $209,425 in 2021)
- Taxable income between $215,950 and $539,900 (increased from $209,425 to $523,600 in 2021): 35%
- Over $539,900 in taxable income (increasing from $523,600 in 2021): 37%
As it stands, pensioners on a fixed income will pay less in taxes because their income is fixed (while inflation is rising). This, technically lowers their taxable income.
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Changes to tax-advantaged accounts
The IRS also announced modifications to retirement contribution limits. You can save an extra $1,000 in your 401(k) in 2022. Making sure you are maxing out your donations is one method to save money on taxes. Recent changes will also affect taxpayers who qualify for and have a Health Savings Account. The yearly contribution maximum for individuals has been increased to $4,950 (a $150 rise). The maximum amount for a family plan has increased by $250 to $7,400. HSA balances can be carried year-after-year and interest can be earned tax-free.
You must file and pay your taxes on time and abide by the tax code in all respects to avoid an IRS tax investigation or harsh penalties. If you find yourself the subject of an IRS tax investigation in Dallas, contact the Law Offices of Nick Nemeth. Our team of Dallas IRS lawyers is always ready to help you find the best IRS problem resolution. To schedule an appointment, call (972) 426-2553 or fill out our Contact Form.