End-of-year tax update: IRS news and strategic moves for 2023

ARTICLE | December 12, 2023

As the year draws to a close, it’s crucial for taxpayers to stay ahead of the curve with the latest tax updates from the IRS. From updated tax brackets to increased retirement contribution limits, understanding these developments is essential for maximizing your tax benefits and minimizing liabilities.

In this article, we’ll review the latest IRS news releases and provide you with actionable year-end strategies to ensure you’re in the best possible position for the upcoming year.

IRS news and updates

Updated tax brackets

The IRS has made adjustments to the federal income tax brackets for the 2023 tax year to accommodate the effects of inflation, which have been the highest in decades. While the actual tax rates remain unchanged, the brackets themselves have been increased by approximately 7%.

2023 tax brackets for single filers

Marginal Tax Rate	2022 income thresholds	2023 income thresholds
10%	Up to $10,275	Up to $11,000
12%	$10,276-$41,775	$11,001-$44,725
22%	$41,776-$89,075	$44,726-$95,375
24%	$89,076-$170,050	$95,376-$182,100
32%	$170,051-$215,950	$182,101-$231,250
35%	$215,951-$539,900	$231,251-$578,125
37%	Over $539,900	Over $578,125

2023 tax brackets for married filing jointly

Marginal Tax Rate	2022 income thresholds	2023 income thresholds
10%	Up to $20,550	Up to $22,000
12%	$20,551-$83,550	$22,001-$89,450
22%	$83,551-$178,150	$89,451-$190,750
24%	$178,151-$340,100	$190,751-$364,200
32%	$340,101-$431,900	$364,201-$462,500
35%	$431,901-$647,850	$462,501-$693,750
37%	Over $647,850	Over $693,750

Employers who filed for the ERC have options for withdrawing or correcting their claim

The employee retention credit (ERC) is a refundable tax credit aimed at businesses and organizations that continued to pay their employees amid pandemic-related shutdowns or significant declines in gross receipts.

Unfortunately, scams tied to the ERC prompted the IRS to impose a moratorium on the processing of new ERC claims. The IRS has now established a special withdrawal process for businesses that previously filed an ERC claim and are unsure about its accuracy. This allows businesses to withdraw their submission, thus avoiding future repayments, interest, and penalties.

The withdrawal method is only available to those who have not yet received a refund and whose claim is currently in process with the IRS. For more information about ERC withdrawal eligibility and how to request a claim withdrawal, please see the IRS’s guidance or contact our office, as you must follow different steps depending on your situation.

Year-end tax strategies

All taxpayers can take advantage of this last quarter to prepare for the upcoming tax season. Here are some proactive moves to consider before the end of the year:

Maximize tax savings on retirement planning. Keep an eye on your contribution limits for retirement accounts and ensure you take the required minimum distributions if you’ve reached the eligible age.
Decide between the itemized and standard deduction. If your itemized deductions exceed the standard deduction (or are close to the threshold), consider ways you may be able to increase itemized deductions before the end of the year so you can benefit more from deductions when you file in 2024.
Plan your medical expenses. Only medical expenses exceeding 7.5% of your AGI are deductible. If you plan to itemize and your expenses are hovering around this limit, consider scheduling medical appointments or procedures within the year.
Be mindful of your income tax brackets. If you foresee a change in income, scheduling certain expenses for the higher-tax-bracket year could be a wise strategy.
Charitable donations. If you plan to itemize, you might consider charitable contributions as a way to maximize your deductions. If you’re contemplating a donation, it could be wise to do so before the end of the year. Remember to request proper documentation from the charity.
Tax loss harvesting. If you’ve realized capital gains from selling investments at a profit, you can offset those gains by selling other investments at a loss. This maneuver can reduce your taxable income and lower your tax bill. However, be wary of the wash-sale rule, which prohibits repurchasing the same security within 30 days after the sale at a loss.
Business expense planning and deductions. For business owners, the year’s end is a crucial time to assess your expenses and strategize for the upcoming year. Consider making necessary business-related purchases before year-end to claim deductions for the current tax year. Also, review potential deductions and ensure you have the appropriate documentation ready.

As the tax terrain continues to evolve, it is imperative to stay informed and make decisions that will optimize your tax position. Our expert advisors are always available to provide guidance and discuss these updates in detail. Should you have any questions or wish to discuss these IRS updates and strategic tax moves for the coming year, please do not hesitate to contact our office. Our goal is to help you navigate these changes and make the most of your financial future.