This month, TMG celebrates 15 years serving our clients and community. We're excited to begin another year and eager to get this tax season underway. Filing season opened this week, and already we're seeing confusion.

Due to the recent winter storms, Monterey County is one of many California Counties under Federal and State Disaster Emergency Declarations. IRS and FTB both issued extensions of time to file and make certain payments for individuals and businesses to May 15, 2023. Thankfully, we were spared serious impacts from the weather, and were afforded the opportunity to just enjoy the rain and all the beauty the water is bringing to our neighborhoods. We intend to keep to the normal and customary filing deadlines for small businesses (March 15th) and individuals (April 18th this year) with the hope we can end the filing season timely and with minimal need for extensions. Your support in swiftly returning document requests and getting your tax review appointments scheduled is most appreciated. Should any of our clients need an extension, please let us know at your earliest opportunity and we'll be happy to oblige.

Several changes and updates to the tax code that may impact our clients are noted below. Of note, due to the Inflation Reduction Act of 2022, solar installations may be more financially prudent for our clients this year. The federal tax credit was originally expected to drop to 23% this year; however, that has now been restored to 30% of the total allowable installation, including standalone home backup batteries, and the 30% credit has been extended to 2032. Coupled with changes expanding the home energy efficient improvements credit to up to $3,200 annually, making improvements to take your home off-grid and more efficient may now make better financial sense.

We're honored to have served our clients these past 15 years. Your energy, engagement, and loyal custom is appreciated more than words can express. Supporting the transformative growth of small businesses and families is our passion. We look forward to another 15 years, and thank you for your continued trust to walk these journeys with each of you. Alons y!

Here are some of the changes and issues you need to know.

Federal Solar Tax Credit:

In 2022, the Residential Energy Efficient Property Credit has changed to the Residential Clean Energy Credit. This Federal income tax credit is available to existing and new construction homes that install solar, wind power, geothermal heat pumps, biomass fuel property, and/or fuel cell property. The credit has been extended to property placed in service through December 31, 2034. For 2022, and through 2032, the credit rate is 30% of the cost of eligible property. Solar roofing tiles and shingles that serve both as traditional roofing and energy storage are considered qualified expenditures eligible for the tax credit. The cost of labor is included when computing the credit and there is no annual limit, except for fuel cell property. Structural components such as a roof’s decking or rafters that serve only a roofing or structural function do not qualify for the credit. The Residential Clean Energy Credit is nonrefundable, but unused amounts may be carried forward to the following year.

IRS Phone Updates:

To prepare for the upcoming tax season, the Internal Revenue Service (IRS) announced that 4,000 new customer service representatives have been hired. The representatives are currently training to help taxpayers over the phone in hopes of alleviating the long wait times that currently plague their phone queue. In an additional effort, back in October 2022, the IRS began a pilot program that requires callers to agonizingly repeat verbal phrases before being transferred to an IRS representative. There is a bright side to this annoyance. The new program uses speech recognition to ensure a live person is calling, which will phase out commercial line-jumping technologies that begin calling as soon as the phone lines open. The goal is to make it so live callers can get into the queue and not be hit with the dreaded "due to high call volume" disconnect message.

Notices from FTB - 4734D and 3904:

There has been an influx of FTB (California tax return) notices being mailed to taxpayers. When the FTB suspects there is fraud within a submitted return, they will reach out via mail to notify you that additional information needs to be verified before processing the return. Until a response is provided, potential refunds will be on hold! Most notices can be resolved by calling the FTB and providing a few pieces of clarifying information. Due to prevalent scams, it is not recommended to mail or fax information unless an FTB representative confirms the notice cannot be resolved via phone.

CA Pay Transparency: In the new year, states are implementing new laws surrounding job-posting requirements and pay data disclosures.

Effective January 1, 2023, California law requires public and private employers with 15 or more employees to include a pay scale within their job postings. For employers with less than 15 employees, pay scales must be provided if requested by the applicant.

In an effort towards further pay transparency, if requested, employers (15 or more) must also provide existing employees with the pay scale for their current employed position. This is in an attempt to have employees confirm their pay is on par with their peers.

Lastly, companies with 100 or more employees must annually report employee and contractor pay data including race, ethnicity, and gender, to detect and avoid discriminatory pay patterns.

Potential taxes on forgiven PPP loans:

Paycheck Protection Program (PPP) loans are generally forgiven and not included in gross income, making them non-taxable. In some instances, the IRS may tax the granted loan amount and require repayment of the funds if:

• The borrower did not initially qualify for the PPP loan (but was given one) or

• The borrower spent the loan on nonqualified expenses.

If this happens to you, consult with us to discuss potential next steps to mitigate the ramifications.

Clean Vehicle Credit:

Starting in 2023, the Clean Vehicle Credit will be reserved to those with a modified AGI of equal to or less than $300,000 for married filing jointly, $225,000 for Head of Household, and $150,000 for all other taxpayers. The credit can be claimed if your modified AGI is within the restricted limit either the year of the vehicle purchase (2023) or the prior tax year (2022).

Additionally, the Clean Vehicle Credit is not eligible for vehicles with a manufacturer's suggested retail price greater than $80,000 for vans, pickup trucks, or SUVs and $50,000 for all other vehicles. More information and a list of eligible vehicles can be found here:

Gifting Tax Strategy:

Leveraging the annual gift limit can be a resourceful way to reduce your taxable income. The annual gifting limit per recipient is $16,000 in 2022 and will increase to $17,000 in 2023. Gifts over this allotted amount are taxable and require the filing of a gift tax return (Form 709). When determining the true gift amount, remember that tuition paid directly to a qualified educational organization and direct medical payments to a medical provider are usually not considered gifts.

As always, never hesitate to reach out with any questions about these, or any other matter.

Very respectfully,

Team Mattox