KEY TAX PROVISIONS TO REMEMBER ENTERING 2022

There are several tax provisions that taxpayers should be aware of that take effect or will impact 2022 taxes:

• Payroll Tax Deferment. The CARES Act allowed employers to defer deposits and payments of their share of Social Security taxes and certain railroad retirement taxes from March 27 through December 31, 2020. Under the CARES Act, deposits must be timely deposited to avoid penalties and interest retroactive to original 2020 due dates. Fifty percent must be paid by December 31, 2021, but because that day is considered a holiday, the deadline is instead January 3, 2022.

• Employee Retention Credit. The CARES Act also created the employee retention tax credit (ERTC), which provided specified employers a credit against employment taxes equal to 70% of qualified wages paid in a calendar quarter before January 1, 2022, up to $10,000 for each employee. The American Rescue Plan Act of 2021 extended the ERTC through January 1, 2022, but the recently enacted Infrastructure Investment and Jobs Act, eliminated the credit (except for recovery startup businesses), retroactive to September 30, 2021.This caused confusion among employers who had anticipated the credit through the end of this year. In response, the IRS issued Notice 2021-65 to provide guidance applicable to employers that received an advance payment of the ERTC for fourth-quarter 2021. The IRS said that if you had an advance, you may repay that advance by January 31, 2022, the due date for the fourth quarter Form 941.

• Per-Diem Rates. On November 16, the IRS issued Notice 2021-63, which provides a special rule allowing a temporary 100% deduction meal portion of a per diem rate or allowance as being attributable to food or beverages provided by a restaurant. The notice is effective January 1, 2021, through December 31, 2022.

• 401(k) Contributions. 401(k) contribution maximum increased from $19,500 in 2021 to $20,500 in 2022. The $6,500 catch-up contribution for those age 50 or older remains unchanged.

• Standard Deduction. The standard deduction available for those taxpayers who do not itemize will increase for 2022. Married couples filing jointly will have a standard deduction of $25,900, single and married filing separately will have a standard deduction of $12,950, and head of household standard deduction will be $19,400.

Please contact Stanfield + O’Dell with any questions.