The 2022 tax year is going to change significantly for just about everyone, whether you’re an employer or an individual. While everyone should be aware of the new 2022 tax code, if you’re a business owner, you should definitely be aware of what the new tax code for 2022 will entail. The 2022 tax code will likely have a major impact on your business, and here is an overview of the new tax rules for 2022, so you will know what to expect:
Changes in corporate tax rates
The Biden administration has proposed several substantial changes to corporate taxes starting in 2022. Corporate tax rates have been steady at 21% since 2017, but as of 2022, this tax rate is likely to increase to 28%. This higher tax rate will be effective from January 1, 2020 to January 1, 2022, so when taxes are filed in 2022, corporate taxes will then increase. This rate increase would be applicable to all C corporations, regardless of the size of the company.
15% minimum tax payment on book income
For larger companies that exceed $2 billion in book revenue, an additional 15% minimum income tax would be applicable. This tax payment would apply to pre-tax income after deductions and losses have been subtracted. This 15% minimum income tax would be credited against the business’s regular tax for tax years in the future.
New tax changes regarding Paypal and other third party payers
It has never been a requirement for third party cash apps like Paypal, Venmo and many other apps to report payments to the IRS unless payments were more than $20,000. However, new tax laws for 2022 require that any payments be reported if they exceed $600. Many people receiving cash regularly through these methods have been able to avoid paying taxes on this money, but the IRS is not allowing this to continue. This would likely only affect business-related cash transactions via these third party apps, and not personal transactions, but if personal transactions exceed a certain amount, then they, too, could be taxed in some circumstances.
Tax changes and inflation
As a result of inflation and the Corona virus pandemic, certain deductions have increased slightly, as a way to compensate. For instance, the standard deduction has increased from $12,400 to $12,550 for an individual. The standard deduction has also increased slightly for married couples, seniors, and more.
Changes specific to South Florida
If you live in Miami or another city in South Florida, you’re likely concerned about any business tax changes for your specific area. Corporate income taxes had previously been reduced from 5.5% in 2019 to 4.458% but will now return to 5.5% in 2022.
Tax laws can be complicated, especially when a number of changes occur at once. If you don’t understand the 2022 tax code or you have any questions, you may contact your CPA or refer to the IRS website for answers. Not only can you CPA answer all your tax-related questions, but he or she may also be able to provide protection for you should your company be audited in the future.