Individual Strategies

Thanks to the Inflation Reduction Act of 2022, the federal government is giving out tens of billions of dollars in tax credits to incentivize taxpayers to purchase electric vehicles. As with any government program, claiming the benefits can be complicated. Since Congress used tax credits to deliver the program, and the personal tax credits are income-limited, tax planning can help a taxpayer who would otherwise not qualify for these benefits. This article will briefly overview the two personal electric vehicle tax credits, followed by several tax planning strategies to unlock these credits for taxpayers who may not otherwise qualify.

Joseph Michael Balint had some really hard luck. He was in prison in Florida from December 17, 2013, through January 6, 2015. Fearful of forfeiting assets, he transferred everything to his wife, Jacqueline, and gave her power of attorney early in his prison term. What he had not planned on was her emptying the retirement accounts and leaving him with the tax tab. His luck turned a bit in Tax Court, as we shall see.

The federal government is there to reduce taxpayer confusion. That, at least, was one point of the reasoning for the recent IRS decision to again postpone a $600 tax-reporting threshold for people paid via third-party settlement networks. Those who made that amount on the likes of eBay and other online sales sites and who received payment via such platforms as PayPal and Venmo will not have that money reported to the IRS for another year. Does this really let taxpayers off the hook? What strategies should you adapt for when the IRS does mandate this reporting?

This year is far from over for tax planning – for some moves, you have even longer – but now’s the time to start looking and acting on your tax tactics given your circumstances and the 2023 you’ve had so far. What you do or don’t do now could save or cost you next April.

Penalties for procrastination in tax matters can be somewhat harsh. Judge Albert Lauber of the United States Tax Court gave us some lessons on the topic earlier this year. The “strategy” of over withholding so that you can file your return whenever the spirit moves you rather than by the due date has a serious downside. The statute of limitations will not work in your favor, but it will work against you. It is a little like you are playing in a chess tournament and you and your opponent are staring at the board. Your clock is ticking and theirs is not.

The IRS loves to issue cryptocurrency guidance when it’s the most inconvenient for me personally. I’m not sure how they accessed my calendar, but it certainly feels like this one was intentional. I was at a tax conference over the summer to teach an introduction to crypto class immediately after lunch. I had just finished eating when my phone started blowing up. The IRS published a new Revenue Ruling on Staking, 45 minutes before I was to teach about it. I read the six-page document, tried to digest it, and considered how I needed to adapt my material on the fly. Another frequent (but not to be named) Tax Box contributor present at the conference teased me about the situation I found myself in. The class went fine, though, because even with a surprise ruling, the IRS didn’t really say anything surprising. In typical IRS fashion, it also created more questions than it answered.

Tax reporting of overseas accounts has always been an extra chore for some American taxpayers. Now they might have to play a guessing game as well after the Supreme Court’s Bittner decision early this year. The case is a prime example of how taxpayers with international holdings might wrest better tax judgments in the future.

The astronomical costs of a disability can extend beyond extra therapy and special equipment to, potentially, a lifetime of lost earnings. There is some help. The federal government has tax deductions and credits connected with raising a child with special needs, for instance. And though historically a trust has been only financial avenue to care for a disabled loved one, another vehicle is gaining traction. Many tax and financial moves in this area come down to one question that’s unique to this planning: Will money interfere with a disabled person’s ability to get indispensable government benefits?