An increase in the optional standard mileage rate has been announced for the final 6 months of 2022. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.
For the final 6 months of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. These new rates become effective July 1, 2022. The IRS provided legal guidance on the new rates in Announcement 2022-13, issued today.
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2022. The IRS normally updates the mileage rates once a year in the fall for the next calendar year. For travel from Jan. 1 through June 30, 2022, taxpayers should use the rates set forth in Notice 2022-03. While fuel costs are a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.
“The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices,” said IRS Commissioner Chuck Rettig. “We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate.”
The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.
The 14 cents per mile rate for charitable organizations remains unchanged as it is set by statute.
Mileage Rate Changes
|Purpose||Rates 1/1 through 6/30/22||Rates 7/1 through 12/31/22|
This program will distribute $500 million to lower-wage frontline workers who put themselves at risk with admirable commitment to their communities. The one-time Essential Employee Premium Pay Program $500 payments will be delivered to 500,000 people in March in Massachusetts, with the first receivers being essential workers.
On December 13, 2021, Gov. Charlie Baker signed into law the COVID-19 Essential Employee Premium Pay Program. The Legislature allocated $460 million for premium payments to Massachusetts workers, which will distribute a $500 payment to 500,000 low-income workers across Massachusetts, according to the state’s website.
- Filed a 2020 tax return
- Been a Massachusetts resident in 2020, or a part-year resident that lived in Massachusetts between March 10, 2020, and December 31, 2020
- Earned income of at least $12,750 in 2020 employment compensation
- Had a total household income at or below 300% of the federal poverty level in 2020
All eligible individuals will automatically receive a check in the mail, according to the state’s website.
However, individuals who received unemployment compensation in 2020 will not be eligible for the first round of payments, nor will Commonwealth executive branch employees who received or will receive a one-time payment from the state as their employer.
The $12,750 income requirement equates to working 20 hours a week for 50 weeks at minimum wage as of 2020 ($12.75). For example, the maximum total income for a single filer with no dependents will be $38,280; a resident who files with a spouse and two dependents, or with no spouse and three dependents, could be eligible with a household income up to $78,600. Married filers can each be eligible, provided each independently qualifies, the website notes.
A future round of payments will be based on 2021 tax returns, and additional rounds are also on the table.
FAQ’s Regarding the Payments
HOW THE PAYMENTS WORK
Q. Do I need to take any action to receive this payment?
No. If you are eligible to receive a payment from this program, you will automatically receive the payment in the form of a check that will be mailed to you.
Q. How many rounds of the premium pay program will there be?
The first round of payments will be made based off 2020 returns. Following tax filing season, the next round of payments will be made using information from 2021 returns. After that, the program will be evaluated for any additional rounds.
Q. Are payments being sent to workers in certain industries?
No, your eligibility is not determined by the industry in which you work. You are eligible for a payment if your income from employment in 2020 was at least $12,750 and your total income puts you below 300% of the federal poverty level, based on filed 2020 Massachusetts tax returns.
Q. How do I find out what my gross income was in 2020?
Gross income is defined as federal adjusted gross income for tax year 2020. To find your federal adjusted gross income, look at your 2020 Massachusetts Form 1, or at line 11 of your 2020 U.S. Form 1040.
Q. What is income from employment?
Income from employment means compensation paid in connection with work you did in 2020, as opposed to retirement income, investment income, or other income not associated with a job. More specifically, income from employment would have been reported on Line 3, Line 6a, Line 6b, or Line 7 (non-passive income only) of your Form 1 for 2020.
Q. I filed for unemployment in 2021 and 2019, am I eligible for a payment?
If you claimed unemployment compensation in 2020, you are not eligible for a check in round 1 of the premium pay program. However, unemployment compensation in 2019 or 2021 does not affect eligibility for a round 1 check, so long as you are otherwise eligible based on residency and income.
Q. What does three times the federal poverty level mean?
The U.S. Department of Health and Human Services creates a table each year as a guideline for gauging the “poverty line”; income below this level implies a household is living in poverty. The poverty level increases for households with more people living in them. This table is used by states and the federal government to set eligibility for various programs, including this program, often by using a multiple of the Federal Poverty Level in order to set a uniform cutoff for lower or middle income households.
Here’s the chart for 300% of, or three times, FPL for 2020:
|Persons in family/household||300% of FPL|
|Persons in family/household||300% of FPL|
For family size greater than 8, add $13,440 for each additional member to calculate 300% of FPL.
Q. My spouse works part-time, and we file jointly. Are we both eligible to receive a payment?
Each spouse must be independently eligible in order for that spouse to receive a payment. In other words, each spouse must 1) be a resident on or after March 10, 2020; 2) have 2020 earnings from employment of at least $12,750; and 2) have no unemployment compensation in 2020. Additionally, you and your spouse’s total income (federal adjusted gross income) cannot be greater than 300% of the federal poverty level ($51,720 for a family of two, or more if you claim other dependents on your taxes).
Therefore, it is possible that neither spouse, or only one spouse, or both spouses would be eligible for a payment.
Q. I made below the minimum threshold in 2020 but was within the range this past year. Will I be eligible in a future round?
Further information on future rounds will be available this summer. Please note that income thresholds may be adjusted for 2021, as both the minimum wage and the Federal Poverty Level figures changed from 2020 to 2021.
Q. What should I do if I have questions about my eligibility?
A call center is available to answer questions about eligibility at (866) 750-9803 Monday through Friday, 9am – 4pm.
A premium pay call center is available at (866) 750-9803 to answer questions Monday through Friday, 9am – 4pm.
It’s April already. Are your taxes done? If your answer to the question is no, you are not alone. The Internal Revenue Service says as many as 25 percent of taxpayers file their returns the final two weeks before the filing deadline. And with the recent COVID-19 Coronavirus Pandemic that we have been experiencing as well as the multiple stimulus programs offered, that percentage is probably quite higher.
If you have not completed your taxes yet, here are some stress-relieving ideas:
Don’t Procrastinate Anymore – Resist the temptation to put off your taxes until the very last minute. Your return takes time to prepare and your preparer may need to request certain documents from you, which will take additional time.
Don’t Panic If You Can’t Pay – If you can’t immediately pay the taxes you owe, consider some alternatives. You can apply for an IRS installment agreement, suggesting your own monthly payment amount and due date, and getting a reduced late-payment penalty rate. You also have various options for charging your balance on a credit card. There is no IRS fee for credit card payments, however the processing companies charge a convenience fee. Electronic filers with a balance due can file early and authorize the government’s financial agent to take the money directly from their checking or savings account on the April due date, with no fee.
Request an Extension of Time to File,- But Pay on Time – If the clock runs out, you can get an automatic six-month extension, bringing the filing date to October 15, 2022. The extension itself does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late-payment penalty if you have not paid at least 90 percent of your total tax by that date (normally, but see exception above). Contact your tax professional for a variety of easy ways to apply for an extension.
To get an estimate of what you owe, you generally have to do a dry run of your tax return—which probably means you will have almost everything you need to file anyway. If they’re 90 percent done, it’s really in your best interest to just get it done and file by April 15th (and for this current tax season, you have until April 19th if you live in Massachusetts or Maine).
Contribute to (or Open) an IRA Account or HSA Account
You can make previous-year contributions to a Traditional or Roth IRA, or SEP-IRA through the filing deadline. If you still need to open an account, be warned that some companies’ processes are not instantaneous. If you are under 50, you can contribute up to $6,000 into your Traditional or Roth IRA accounts and add an additional $1,000 if you are over age 50. SEP-IRA contributions can not exceed $58,000 but the actual amount depends on your specific situation. Best to seek professional advice on this.
If you’re covered by a high-deductible health plan—defined as a minimum deductible of $1,400 for an individual or $2,800 for a family—you can also deduct contributions made to a Health Savings Account (HSA). You have until the tax filing deadline to make a deductible contribution. For 2021, you can contribute up to $3,600 to an HSA if you have self-only coverage or $7,200 for family coverage. People aged 55 or older can make an additional $1,000 “catch-up” contribution.
If you are needing assistance, please reach out to us here at Northeast Financial Strategies ASAP.