Piggy bank
12 Jan

We usher in 2023, leaving some of the negatives behind us! COVID and other respiratory illnesses may always be with us, like the flu. Supply chain issues seem to be settled in most industries with some shortages lingering. As I speak with clients throughout the year, labor shortages still plague many employers. There does not seem to be one answer to attempt to solve the shortage as the work dynamic is shifting. It certainly is an issue in continuing to grow the economy and market.

Inflation is the #1 concern on the minds of our citizens. Budgets being juggled and long-term concerns as to the effect on our economy. Now that the mid-term elections are behind us, maybe Congress can put politics behind them and focus on the citizen’s best interests. I know that this sounds over-simplified, but it should be the starting point!

The Inflation Reduction Act, signed prior to the midterm elections, shows us some of the new tax focus, but much of the bill will not be implemented for years ahead. Although I majored in economics, I have found no commentary that says this bill will affect inflation in any way. Maybe the new Congress can attack this problem?

The new law will primarily be paid for by raising taxes on our largest corporations. In addition, they are adding 85,000 employees to the IRS—auditors, enforcement, administration, and technology. The thought is that we are missing billions of dollars in unreported taxes. I have spoken to IRS agents—they are so shorthanded on administration and outdated technology that the whole system is bogged down.  There are millions of taxpayers who still have not received 2021 refunds!

The new law provides many energy savings incentives; therefore please save all of your documentation for your tax appointment. There are restrictions, limitations, and certain qualifiers. Specifically, cars must meet rules concerning U.S. content and sales before being eligible. This can be found on the IRS.gov website. A few drugs are now capped by Medicare. Most changes have been pushed to the future.

In general, Standard Deductions and the Tax Brackets have been increased by 7%. The long-term capital gains tax remains, but the income limit before capital gains are taxed has been increased. Significant changes have been made in several areas: in the retirement contribution amounts, raising the age for Required Minimum Distributions, rules about 529 plans, and student loan payments for retirement. There are also some code changes to reduce credits and deductions for many taxpayers.

We are your tax advocate and strive to be UpToDate and legally minimize your taxes!

From the Desk of Kent C Newhart