Tax Guru – Ker$tetter Letter

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IRS Announces 2023 Inflation Adjustments

Posted by taxguru on October 18, 2022

There are few aspects of life that are untouched by the current Biden created inflation. While most are bad consequences, some are pretty nice. Social Security recipients will have a large increase in our monthly payments. Bank savings accounts are now back to paying actual interest on deposits.

As I have covered for several years, IRS is required by law to index a lot of tax items for the higher cost of living in order to prevent inflation caused Bracket Creep, where raises received by people in order to offset higher living costs push them into higher percentage tax brackets.

Side-Note: Every so often some of our genius rulers in DC will float the idea of doing away with these annual inflation adjustments, citing the huge amounts of extra money the Federal government will collect as a result. Luckily, those plans don’t usually get very far in DC.

The math wizards at IRS have done the calculations and have come up with the inflation adjustments for over 60 items in the Tax Code that will take effect as of January 1, 2023.

The IRS Press Release with a general summary of some of the changes, as well as some obvious typos referencing incorrect years:
IRS provides tax inflation adjustments for tax year 2023

Many more specific details can be found in this 28 page PDF version of Revenue Procedure 2022-38.

Gift Tax Exemption Increases
Having this info almost two and a half months before the end of 2022 can be quite useful for people working up tax plans that cross multiple years. Besides the effects of these inflation adjustments on income taxes for 2023, a more interesting change is the annual Gift Tax exclusion. As I have described many times before, this figure often remains steady for a number of years before being bumped up because it is only allowed to increase in even one thousand dollar increments based on the cumulative inflation factor since the previous increase. This is the first time that I can recall the amount increasing in two consecutive years: to $17,000 in 2023, from the $16,000 amount we have had for 2022. Many people use these annual gift tax exemptions as part of their long term Estate and Gifting strategies.

Out of curiosity, I dug up the recent history of the annual Gift Tax exemption amounts so we can see how rare it is to have an increase so soon after a previous one.

1997 – 2001 $10,000 per donor (giver) per donee (recipient)
2002 – 2005 $11,000
2006 – 2008 $12,000
2009 – 2012 $13,000
2013 – 2017 $14,000
2018 – 2021 $15,000
2022 – 2022 $16,000
2023 – ???? $17,000

Posted in Gifting, inflation, IRS | Comments Off on IRS Announces 2023 Inflation Adjustments

New TaxMan Video from The Beatles

Posted by taxguru on October 15, 2022

For decades, a hobby of mine has been collecting and sharing different versions of George Harrison’s song “TaxMan” which was first heard on the Beatles’ 1966 album, Revolver. For obvious reasons, most of the versions have been covers by other artists and groups. We now have a new 2022 animated video version by The Beatles.

Over the past few years, Giles Martin, the son of the original Beatles producer, George Martin, has been working with the surviving Beatles, along with George and John’s families, to assemble newly remastered versions of their albums, using more modern technology than was available back in the 1960s. They have also included several out-takes and alternative studio versions from the Beatles’ recording sessions.

In a few weeks, on October 28, they will be releasing the new remixed and expanded version of Revolver, which is supposed to include alternative versions of TaxMan. Thanks to this article from the Ultimate Classic Rock website, I learned of this new video of the Beatles singing TaxMan with creative animations of the lyrics. I have already added this to my YouTube TaxMan playlist.

Posted in Beatles, Music, TaxMan, video | Comments Off on New TaxMan Video from The Beatles

IRS Disaster Related Extended Filing Dates

Posted by taxguru on September 29, 2022

As we were waiting for Hurricane Ian to reach us, I was thinking that if it turned out to be as destructive as predicted, IRS would have to extend the upcoming October 17 deadline for taxpayers and preparers who are located here in Florida, as they recently did for storm and flood victims in Alaska and Hurricane Fiona victims in Puerto Rico. Those extensions were until February 15 of 2023.

Fortunately, IRS acted quickly and has issued the same extension of the October 17 deadline for all taxpayers and preparers in Florida since the entire state is part of the federally designated disaster area. That extra time will help ease the stress of having to get a lot of tax returns wrapped up by October 17.

Besides the longer time allowed to prepare and file 2021 tax returns, the status of being a federally designated disaster allows for a very unique tax saving opportunity. Any losses suffered from these recent disasters may be deducted on 2021 tax returns, even though the disaster took place in 2022. It is an excellent way to get tax money back into the hands of the victims much sooner than making them wait another year.

I have prepared several of these kinds of tax returns, where we claimed the losses in the year before the disaster. Most of these were for losses due to earthquakes and wildfires in California. The trickiest aspect to claiming such a deduction is calculating the amounts of the losses so soon after the event happened. We need to factor in how much is expected to be received from any insurance coverage that may apply and come up with the net loss incurred.

A tip for anyone claiming these kinds of losses on their tax returns: I have been able to avoid any IRS challenges to these disaster loss deductions by attaching before and after photographs of the damaged or destroyed properties.

Update 10-5-2022: IRS has extended this same official filing delay (until 2/15/2023) to those who were in the Hurricane Ian targets in North & South Carolina.

Posted in disaster, Due Dates, IRS | Comments Off on IRS Disaster Related Extended Filing Dates

IRS Interest Rates Continue To Climb

Posted by taxguru on August 15, 2022

In spite of the Biden Gang’s attempts to pretend that there is no such thing as Inflation, IRS is required to adjust how much they charge for late payments and pay out for late refunds.

As of October 1, 2002, the rate will move from the current 5.0% APR to 6.0% APR.

Here is their official press release, announcing this:

IRS announces interest rate increases for the fourth quarter of 2022; 6% rate applies to most taxpayers starting Oct. 1

Three months from now, there will most likely be another IRS announcement of an even higher rate as of January 1, 2023.

For those people trying to maximize their return on investment, this presents an opportunity to earn much more than banks are paying. In earlier times when IRS interest rates were higher than bank savings accounts, I can recall some clients and others holding off on filing amended refund returns for longer than normal in order to accrue more interest from IRS. I’m not necessarily advising this, but just noting that it is a tactic that some people do in times like this.

Posted in inflation, interest, IRS | Comments Off on IRS Interest Rates Continue To Climb

Giving More Power To IRS

Posted by taxguru on August 7, 2022

There is no shortage of news coverage of the Dims’ proposals to give IRS billions more dollars in order to squeeze more money out of everyone. Here are some more humorous approaches to what we may have to deal with if the IRS’s wet dreams do come true.

From the August 2, 2022 episode of Gutfeld!



From Ben Garrison at GrrrGraphics:


From Rich Terrell:

From Lisa Benson:


From Dana Summers:



As I expected, my favorite satire group, The Babylon Bee, can’t resist pointing out some of the insane aspects of this new law.

New Bill In Congress Hires An IRS Agent To Live In Every Home

10 Ways To Avoid Getting Audited By One Of The 87,000 New IRS Agents

Saruman Breeds Army Of 87,000 More Tax Collectors

Report: By 2026 Everyone In U.S. Will Be Working For IRS And Will All Just Be Auditing Each Other

Gamers Eagerly Await The Release Of ‘Call Of Duty: IRS Auditor’

Want To Be One Of The New IRS Agents? Here Are The 17 Job Requirements

Biden Hires 87,000 Bused-In Migrants As IRS Agents




From A.F. Branco:

From Steve Kelley:

From Dick Wright:

Posted in comix, IRS, parody, video | Comments Off on Giving More Power To IRS

IRS Raises Standard Mileage Rate For Second Half of 2022

Posted by taxguru on June 9, 2022

IRS has released this press release with a slightly misleading headline today:

IRS increases mileage rate for remainder of 2022

Although the “remainder of 2022” includes the rest of June, the increased rates don’t take effect until July 1, 2022.

For Business purposes, the IRS allows 58.5 cents per mile for what was driven between 1/1/22 and 6/30/22 and 62.5 cents per mile for 7/1/22 through 12/31/22.

For Medical and Moving deductions, IRS allows a deduction of 18 cents per mile from 1/1/22 until 6/30/22 and 22 cents per mile for the second half of 2022.

For miles driven on behalf of charities, the rate remains fixed at 14 cents per mile because of the idiocy of our rulers in Congress who omitted any inflation adjustments.

Posted in inflation, IRS, Vehicles | Comments Off on IRS Raises Standard Mileage Rate For Second Half of 2022

Expect IRS To Increase Standard Mileage Rate

Posted by taxguru on May 20, 2022

In normal years, IRS adjusts its standard mileage deduction rate once a year for those taxpayers who don’t want to keep track of their actual expenses, as well as for employee reimbursements.

The standard rate, which has been 58.5 cents per mile for business purposes since the beginning of 2022, is intended to include the operating and ownership costs of an “average” car based on prior year (2021) costs. These include such things as fuel, insurance, oil changes, repairs, registration, washing, and tires. It also includes a factor for the depreciation of the vehicle.

Having been in the tax business for over 45 years, I can remember some years where fuel prices shot up as quickly as they are currently doing. In some of those cases, IRS increased their mileage rates mid-year. Sometimes this was as of July 1, while in other cases it was as of October 1. This meant that taxpayers had to keep track of and report their business miles separately for each time period.

I haven’t seen anything from IRS indicating that this will happen this year, but, given the insane price increases in gasoline and diesel we have been dealing with all over the country, it seems inevitable. The higher purchase prices for both new and used vehicles makes an increase in the depreciation component of the standard mileage rate also very likely.

Whether IRS raises its standard deduction rate or not, this is a perfect example of why it is important for everyone to keep track of their actual vehicle expenses because they will almost certainly be higher than whatever standard rate IRS allows for 2022.

Update 5/25/22: During today’s CPELink Monthly Tax Update, there was a mention of a recent letter that some CongressCritters wrote to the IRS Commissioner, requesting an increase in the standard mileage allowance to account for the drastic increases in fuel prices since 2021.
Press Release From Arizona Congressman
Copy of Letter

Posted in inflation, IRS, Vehicles | Comments Off on Expect IRS To Increase Standard Mileage Rate

IRS Interest Rates Continue To Rise

Posted by taxguru on May 20, 2022

Unlike most State tax agencies, which don’t ever change the interest rates that they charge on late tax payments (Arkansas has always been 10%) or adjust them annually (California, et al), IRS modifies its rates every three months to stay in sync with the overall financial markets.

As anyone would have expected, IRS has just announced that, as of July 1, it will be bumping up the rate it will be charging to 5% from the current 4%.

Here is their press release: IRS interest rates increase for the third quarter of 2022

If you want to consider a good side to this, besides charging taxpayers more on late tax payments, this also means that IRS will be paying taxpayers more for delayed refunds. Those millions of people who still have tax returns stuck in the IRS backlog of unprocessed returns will be earning much more from IRS than any banks are currently paying on savings accounts.

Posted in inflation, interest, IRS | Comments Off on IRS Interest Rates Continue To Rise

The Tax Season Bubble

Posted by taxguru on April 5, 2022

A perfect representation of how the two weeks leading up to Tax Day feel.

Posted in comix, TaxSeason | Comments Off on The Tax Season Bubble

Are IRS computer systems impossible to fix?

Posted by taxguru on March 9, 2022

Nobody should hold their breath expecting the wizards at IRS to get their act together with their computer systems any time this century.

A client just sent me this link to Americans For Tax Reform‘s handy list of just some of the IRS’s failed attempts to modernize their computer systems.

40 Years of Failure: IRS Unable to Fix Computer System

I remember 30 plus years ago, rather than hire outside tech experts to help them, they thought they could save money by drafting employees from various IRS departments, who had zero IT skills, to design more modern systems.  I don’t recall how many millions or billions of dollars they wasted on this project, but the whole thing had to be scrapped.

It may be amusing, but it’s definitely not funny when you consider how much money they have wasted and how much aggravation, expense and hassle their incompetence has cost all of us who are on the receiving end of their screw-ups.

Posted in computers, IRS | Comments Off on Are IRS computer systems impossible to fix?