The upcoming tax season is approaching, so it’s high time to discuss the changes between tax season 2021 and 2022.
For example, there has been an increase in standard deductions:
- $25,900 for a married joint return or qualifying widow(er). This is an $800 increase from the 2021 tax bracket of $25,100 for this taxpayer category.
- $19,400 for heads of households. This is a $600 increase from the 2021 tax bracket of $18,800 for this category.
- $12,950 for all other taxpayers. This is a $400 increase from the 2021 tax bracket of $12,550 for individuals and married couples filing separately.
This blog will be helpful for all individual and business taxpayers, irrespective of their IRS filing status — single, married filing jointly or separately, and heads of households.
Table of contents
- 2021 vs. 2022 tax brackets: the key tax changes in 2022
- Estimated IRS income tax rates 2022
- 2022 tax deadlines
- How to e-file tax returns with pdfFiller
2021 vs. 2022 tax brackets: the key tax changes in 2022
Each year, the IRS publishes the updated tax brackets on its website. However, this year the details are still being ironed out and will be published later on. This article covers the proposed 2022 tax brackets based on President Biden’s ‘Green Book’ to ensure that you and your business stay up to date.
Proposed 2022 tax changes in President Biden’s ‘Green Book’
- Corporate tax. The proposal was made to increase the corporate tax rate. Rather than the 21% from the Tax Cuts & Jobs Act of 2017, C-corporations would pay a 28% flat tax rate. For the taxable year starting after January 1, 2021, the tax rate would be 21% plus 7% times the portion of the taxable year falling in 2022.
- The individual top marginal tax rate also increases from 37% to 39.6%, starting with the 2022 tax year. This change would speed up the return to a top income tax bracket of 39.6% rather than waiting until tax years after 2025.
- High earner capital gains and qualified dividend rate. There are many changes taking place insofar as taxing capital gains. For example, for married taxpayers filing jointly with an AGI (adjusted gross income) of $1 million and over, there are increased long-term capital gains and qualified dividends. However, they will be taxed at ordinary income tax rates for all income above $1 million. In the case of filing separately, there will be a penalty of over $500,000.
- Property gifts and death transfers. If a property appreciates in value and, after that, is transferred as a gift or upon death, this would be considered a sale. A donor or deceased person who transferred the assets would be the seller. As a result, gains are treated as income on their federal estate, gift, or separate capital gains tax returns. On the other hand, carryforwards and capital losses from a transfer at death may be taken on a final income tax return. Any taxes imposed on the sale would be deducted on the deceased individual’s estate return.
- Net investment income tax and self-employment contribution tax. A Net Investment Income Tax (NIIT) or Self-Employment Contribution Act Tax (SECA) would be used for high-earner pass-through business income. NIIT definition expands to all business or trade income from high-income taxpayers with an adjusted gross income of over $400,000 having to pay a 3.8% Medical Tax. On the other hand, LLC members, S-corporation shareholders, and limited partners who provide services and materially participate in their company would be subject to SECA.
- Carried interest would be considered as ordinary income subject to self-employment taxes. As a result, a partner’s income share from an investment partnership would be taxed as ordinary income in case the partner’s taxable income across all sources is over $400,000.
- Like-kind exchanges. In the case of exchanges completed after December 31, 2021, gains may be deferred in Section 1031 for up to $500,000 per taxpayer. Although, during a transfer year, gains over this limit would be taxable.
Estimated IRS income tax rates 2022
The 2022 Projected U.S. Tax Rates report shows deductions, limitations, and upward change to tax brackets thresholds. Below you can find a table with the projected tax rate schedules for 2022. You can use it to prepare your tax return filing(s) for 2022.
There are also projected standard deduction amounts for 2022:
You can also find projected Alternative Minimum Tax (AMT) exemption amounts below:
2022 tax deadlines:
Each year, Tax Day in the United States falls on the same day, April 15. The IRS extended the filing and payment deadlines for the 2019 and 2020 tax years due to COVID-19, but you shouldn’t expect another date to pay and submit your 2021 tax return. The IRS hasn’t announced when it will start to accept 2021 tax returns yet, but the date usually falls somewhere in mid-February.
A chart of tax deadlines for 2022
In the chart below, you can find the tax deadlines for the primary forms. If you have to submit any additional forms along with the main ones, check the IRS website.
- Individual and sole proprietor income tax returns (IRS Form 1040/1040-ES) have to be completed and submitted for 2021 individual tax returns by April 15, 2022 (Friday).
- Partnership income tax returns (IRS Form 1065) must be completed and submitted by March 15, 2022 (Tuesday).
- S-corporation income tax returns (IRS Form 1120-S):
- For S-corporations operating on a calendar year, the filing deadline is due on March 15, 2021.
- For S-corporations and partnerships operating in a fiscal year, the filing deadline is the 15th day of the fourth month following the end of the fiscal year.
- C-corporation income tax returns (IRS Form 1120):
- The filing deadline for C-corporations operating on a calendar year is due on April 15, 2021.
- For C-corporations that operate on a fiscal year, the tax returns deadline is the 15th day of the fourth month following the end of the corporation’s fiscal year.
Depending on your IRS filing status, you will need to complete the following forms:
- IRS Form 1040 is filled out by individuals or sole proprietors filing a federal income tax return. You have to use this form to calculate the adjusted gross income (AGI) and taxable income.
Take note: Filing itemized deductions Schedule A Form 1040 can help you obtain a larger tax refund.
- IRS Form 1040-ES is filled out by individuals and sole proprietors to calculate and pay the estimated tax for 2021. You can use this form to pay tax on income that isn’t subject to withholding, like self-employment earnings, interest, rents, and more.
- IRS Form 1065 has to be filled by partnerships to report their income, gains, deductions, and so on. A partnership income isn’t taxable, but partners have to report partnership items to the IRS.
As for corporations and IRS corp tax rates, they have to fill out and submit IRS Form 1120 or 1120-S.
An S-corporation is a corporation that passes income, credits, deductions, and losses to shareholders to not pay federal corporate taxes.
A C-corporation is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity.
- IRS Form 1120-S has to be completed by S-corporation shareholders to report income, losses, and dividends to the IRS.
- IRS Form 1120 has to be filled out by domestic corporations to calculate their income tax liability and report their income, gains, losses, deductions, and credits to the IRS.
There are two more forms to consider:
- IRS Form 990 has to be completed and submitted to the IRS by non-profit organizations. This form discloses revenues, expenses, and changes to net assets to the public.
- IRS Form 8868 has to be filled out by tax-exempt organizations to request a three-month extension to file tax returns or request any additional extensions.
How to e-file tax returns with pdfFiller
Due to COVID-19, the IRS supports e-filing for all of the required forms. You can fill and submit a form electronically using pdfFiller. It allows you to fill out any tax form on any desktop or mobile device. Once you’ve finished filing the form, share it in a few clicks. It’s possible to send a PDF by email, text message, fax, USPS mail, or notarize it online — right from your account.