Four Ways Federal Taxes Have Changed for Businesses in 2022

While we’re in the midst of tax filing season, businesses are busy collecting documentation and navigating relevant tax code. 2021 was the first full year of the COVID-19 pandemic, which brought lots of changes, government interventions and for many, confusion. Business owners have had to keep track of everything from federal aid to staff fluctuations to wildly irregular income streams.

To get an idea of the wide-ranging nature of the changes, consider Congress’ running list of deductions and provisions that have expired on the federal level. For businesses and individuals, 34 deductions and provisions expired at the end of 2021 and six expired in the third quarter of the year. At the same time, a number of other updates are coming into effect that stem from the 2017 federal tax bill.

Regulations and rules may seem to change every time you check them, but going into the home stretch of the 2022 tax season, here are four things to keep in mind.

1. Employee retention credit

Look up this topic on the IRS website and you’ll get an infinite loop of confusing updates. But one key thing to know is that this year, the employee retention credit applied to businesses with up to 500 employees, rather than the 100-worker top-end limit of 2020. There are also other ways a company can qualify, so it’s important to work with your tax preparer to learn what the opportunities might be.

2. Digital payments

If you’re paying contract workers through a platform like Venmo or PayPal, keep an eye out for official 1099-style documents from those platforms going forward. Starting in 2022, the platforms will issue filing statements if you used them to pay someone for goods and services greater than $600 per year. That’s a big change from the old rule, which applied for 2021, in which 1099s were issued only for accounts that paid out more than $20,000 and involved more than 200 transactions.

3. Amortizing research costs and capital equipment

The Tax Cut and Jobs Act of 2017 changed federal tax regulations concerning research costs, so businesses are now required to amortize those costs rather than immediately deduct them. This change is supposed to take effect in 2022, but both political parties in Congress have expressed opposition. If the law is repealed, keep an eye out for changes in these regulations over the coming months.

4. IRS backlogs

It’s been a challenging year for the federal tax apparatus, and many businesses and individuals are still waiting for the IRS to process prior year tax returns, refunds and other communications. You’re not imagining it — things are slow going at every level, thanks to the pandemic, funding issues and other challenges. That could mean that this year’s taxes will also be slow to roll through the system.

Whether you’re an individual, a business or an organization, it always helps to keep your paperwork organized and maintain long-term relationships with your accounting team. We recommend browsing the Wall Street Journal’s 2022 tax guide to help inform your conversations and questions going forward.