The Hartford Courant
The 2023 Tax Season is in full swing and that means taxpayers have lots of questions about what’s new this year. The filing deadline is April 18 this year.
We asked Andrew Lattimer, the managing principal of CLA’s (CliftonLarsonAllen) Connecticut offices for some help with tax questions. His offices consisting of approximately 300 individuals in West Hartford, Marlborough, and Shelton. Over the past two years Andrew has helped his clients with the Payroll Protection Program as well as assistance with the Employee Retention Credits.
Andrew has experience with tax planning, research, and advising clients in a variety of industries including auto dealerships, aerospace, manufacturing, hospitality, consumer products, real estate, construction, technology service providers, and healthcare, as well as private equity funds. He specializes in federal and state tax returns for individuals, partnerships, and privately held businesses. Andrew also has significant experience with domestic and multinational companies, as well as S and C corporations. As a consultant, he performs cash flow and liquidation analysis and has experience in research and development credits, mergers, acquisitions, and international taxes.
Andrew will weigh in here on winnings from sports betting and other top tax questions.
Questions:
The Super Bowl 2023 is coming up Feb. 12 and millions of Americans will bet on the game featuring the Philadelphia Eagles and the Kansas City Chiefs.
Are gambling winnings taxable and what do taxpayers need to know?
Yes, gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes, but isn’t limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.
A payer may be required to issue you a W-2G, You must report all gambling winnings on Form 1040 (use Schedule 1 (Form 1040)PDF), including winnings that aren’t reported on a Form W-2G.
Can any gambling losses be written off?
For federal purposes you may deduct gambling losses only if you itemize your deductions on Schedule A and kept a record of your winnings and losses. The amount of losses you deduct can’t be more than the amount of gambling income you reported on your return. Claim your gambling losses up to the amount of winnings, as “Other Itemized Deductions.”
What special steps do taxpayers have to take to write off gambling losses?
If the taxpayer keeps a record of their winnings and losses, they can deduct the losses to the extent of the winnings on their federal return as an itemized deduction on Schedule A. If the taxpayer does not itemize, then the losses will not be deductible.
PHOENIX, ARIZONA – FEBRUARY 08: A view of the Vince Lombardi Trophy and the helmets of the Kansas City Chiefs and the Philadelphia Eagles before a press conference for NFL Commissioner Roger Goodell at Phoenix Convention Center on February 08, 2023 in Phoenix, Arizona. (Photo by Peter Casey/Getty Images)
For the general tax season what are the top changes taxpayers should know about this year?
The biggest change is that R&D Expenditures for businesses in 2022 must be capitalized and taken over five years.
In 2022 the Child and Dependent Care Credit is non-refundable. The maximum credit percentage also drops from 50% to 35%. Fewer care expenses are eligible for the credit, too. For 2022, the credit is only allowed for up to $3,000 in expenses for one child/dependent and $6,000 for more than one. When the 35% maximum credit percentage is applied, that puts the top credit for the 2022 tax year at $1,050 (35% of $3,000) if you have just one child/dependent in your family and $2,100 (35% of $6,000) if you have more. In addition, the full child and dependent care credit will only be allowed for families making less than $15,000 a year in 2022 (instead of $125,000 per year).
Additional areas include the Solar Tax Credit and Electric Vehicle Credits. For those to whom this applies, they shouldn’t forget to take them.
Lastly, the retirement age for people to have to take their Required Minimum Distribution has changed from 72 to 73 staring in 2023. People need to be aware of this and adjust accordingly.
What are the biggest mistakes taxpayers make in filing and how do they avoid them?
One mistake people still make is not choosing direct deposit for their refunds. Refunds have taken longer to get in the past few years by requesting a check—they can get refunds faster by choosing the direct deposit avenue.
People also tend to forget about non-cash charitable contributions such as clothing and food. They should be mindful of these.
There is also the utilization of Health Savings Accounts, Flexible Savings Accounts and Dependent Care Expenses. People who use these should look into potential tax benefits.
What advice would you give to taxpayers to make sure they get refunds in a timely way?
The biggest and simplest advice I can give is to file electronically and have refunds direct deposited. It will save time and result in returns being processed quicker and refunds being received quicker.