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William Byrnes (Texas A&M) tax & compliance articles

TaxFacts Intelligence: Nov 21, 2022

Posted by William Byrnes on November 21, 2022

The Texas A&M Master and LL.M. programs (e.g. international tax, transfer pricing, wealth management, or risk management) are accepting applications from financial professionals and from lawyers. Over 850 enrolled, the enrollment for a course’s section is kept to between 20 and a maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. https://law.tamu.edu/distance-education

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

The CPI-W data for 2022 led to the very large Social Security COLA increase for 2023 – the highest in 40 years. This week, we have guidance that can help clients understand how these increases might impact their overall tax liability. We also have a discussion of a surprise EARN Act provision on retirement catch-up contributions–and a summary of the IRS’ new updated guidance on claiming the work opportunity tax credit. Read on for more.

Social Security COLA is Highest in 40 Years. Based on CPI-W data, the COLA is 8.7% for 2023. That means the average benefit for 70 million Americans increases by $144.10. This 8.7 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 65 million Social Security beneficiaries in January 2023. Increased payments to more than 7 million SSI beneficiaries will begin on December 30, 2022. (Note: some people receive both Social Security and SSI benefits).

Unfortunately, the increase in the value of a taxpayer’s Social Security check has adverse tax consequences because it increases the taxpayer’s income above the thresholds for determining whether the benefits are taxable. Under current law, when an individual earns over $25,000 per year ($32,000 for a married individual), one-half of his or her Social Security benefit plus any earned income will be taxable. Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $160,200 from $147,000. For more information on the tax treatment of Social Security benefits, visit Tax Facts Online. Read More

Senate’s EARN Act Contains New Twist for Catch-Up Contribution Changes. Recent retirement-related legislation has proposed changing the rules governing catch-up contributions so that taxpayers aged 50 and older would be permitted to contribute an extra $10,000 per year if they have reached age 62, 63 or 64 (currently, qualifying taxpayers can make catch-up contributions of $6,500 per year to 401(k)s and $1,000 per year to IRAs). SIMPLE plan participants would receive an additional $5,000 catch-up option. The additional catch-up, however, would be made on an after-tax basis (so it would be treated as a Roth contribution and could be withdrawn tax-free in the future). The EARN Act contains a new twist which would allow taxpayers with income under $100,000 to treat catch-up contributions as either pre-tax or after-tax contributions. The changes would apply in tax years beginning after 2023. While the EARN Act must now be reconciled with the House version, it now seems possible that taxpayers may have an additional option when it comes to retirement savings. For more information on the rules governing catch-up contributions, visit Tax Facts Online. Read More 

IRS Updates Information on the Work Opportunity Tax Credit (WOTC). The IRS has updated its guidance on the WOTC, which is a tax credit that is available to employers who hire certain categories of workers. Employers are required to comply with certain pre-screening and certification procedures to claim the credit. The pre-screen pre-screening requirement is satisfied when the employer and the job applicant complete Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, on or before the day a job offer is made. After pre-screening is complete, the employer must request certification by submitting Form 8850 to the appropriate state workforce agency no later than 28 days after the employee begins work. Qualifying employees include food stamp (SNAP) recipients, Supplemental Security Income (SSI) recipients, long-term family assistance recipients and qualified long-term unemployment recipients, among other groups. In today’s labor market, the WOTC may be more valuable than ever. For more information about this and other business-related tax credits, visit Tax Facts Online. Read More 

Look in your Tax Facts Online app for our continuing analysis of 2022 and 2023 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.

Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier of law schools and is ranked in the top 10 for the employment of its graduating law students among U.S. law schools.

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