News For Your Week Ahead: August 5, 2022

From Markers to Face Masks, Classroom Supplies May Be Tax Deductible | IRS Tax Tip 2022-118

Teachers go above and beyond for their students, often buying classroom supplies needed to make learning successful. The educator expense deduction allows eligible teachers and administrators to deduct part of the cost of technology, supplies and training from their taxes. They can only claim this deduction for expenses that weren’t reimbursed by their employer, a grant or other source.

Who is an eligible educator:

The taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. They must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

Things to know about this deduction:

Starting on tax returns for 2022, educators can deduct up to $300 of trade or business expenses that weren’t reimbursed. If two married educators are filing a joint return, the limit rises to $600. These taxpayers cannot deduct more than $300 each.

For 2021 returns, the limit is $250, or $500 for married educators filing jointly. As teachers prepare for the school year, they should remember to keep receipts after making any purchase to support claiming this deduction.

Qualified expenses are amounts the taxpayer paid themselves during the tax year.

Here are some of the expenses an educator can deduct:

Professional development course fees
Books and supplies
COVID-19 protective items to stop the spread of the disease in the classroom.
Computer equipment, including related software and services
Other equipment and materials used in the classroom

Virginia—Sales and Use Tax: Guidelines Issued for the Application of Tax to Sales of Accommodations Facilitated by Accommodations Intermediaries | via Wolters Kluwer IntelliConnect

Virginia issued guidelines regarding previously enacted legislation that changes the application of the retail sales and use and transient occupancy taxes to sales of accommodations involving accommodations intermediaries. The changes are effective October 1, 2022. Specifically, the legislation does the following:

requires accommodations intermediaries to collect the tax and remit it to the Department of Taxation, and eliminates the requirement that, where the accommodations are provided at a hotel, accommodations intermediaries remit the portion of the tax not attributable to the accommodations fee to the hotel for the hotel to remit to the Department;
provides that in a transaction involving multiple parties that may be considered accommodations intermediaries, such parties may agree that one party is responsible for collecting and remitting the taxes. In such event, the party agreeing to collect and remit such taxes would be the sole party liable for the tax;
makes similar changes to transient occupancy taxes administered by localities;
requires intermediaries to submit to a locality each month the property addresses and gross receipts for all accommodations facilitated by the intermediary in such locality; and
amends various related definitions.

Collection Of Tax Beginning October 1, 2022

For any retail sale of accommodations facilitated by an accommodations intermediary, regardless of whether the accommodations are at a hotel, short-term rental, or other type of lodging, the accommodations intermediary is deemed a dealer making a retail sale of accommodations and must collect the tax computed on the room charge and remit the same to the Department.

For any transaction involving two or more parties that meet the definition of “accommodations intermediary,” the parties may make an agreement regarding which party is responsible for collecting and remitting the tax, so long as the responsible party is a dealer registered with the Department. Additional charges levied in connection with the rental of accommodations that are not part of the “room charge” and the tax collectible on such charges are collectible from the customer by the accommodations provider. In such instances, the accommodations provider must remit the tax collected on the additional charges to the Department.

Accommodations providers are required to collect and remit all taxes on transactions not facilitated by intermediaries.

Similar rules apply to the transient occupancy taxes, which are remitted to the locality. In addition, intermediaries are required to submit to a locality each month the property addresses and gross receipts for all accommodations facilitated by the intermediary in such locality.

Invoice Requirements

In any retail sale of accommodations facilitated by an accommodations intermediary, the accommodations intermediary must separately state the amount of the tax on the bill, invoice, or similar documentation and must add the tax to the room charge. Thereafter, the tax is a debt from the customer to the accommodations intermediary, recoverable at law in the same manner as other debts. Where the retail sale of accommodations is not facilitated by an accommodations intermediary, the accommodations provider must separately state the amount of the tax in the bill, invoice, or similar documentation and must add the tax to the total price paid for the use or possession of the accommodations.

Marketplace Facilitators

Accommodations intermediaries may have an obligation to register and collect the retail sales and use tax as marketplace facilitators. Marketplace facilitators are generally permitted to apply for waivers of their duty to collect and remit tax based on a showing either of undue hardship or that all of their marketplace sellers are already registered dealers. In the past, these waivers may have permitted accommodations intermediaries to allow accommodations providers to collect and remit all taxes due on retail sales of accommodations. However, under the new legislation, accommodations intermediaries, where they are deemed dealers for purposes of a retail sale of accommodations, may not assign or otherwise transfer their duty to collect and remit taxes as required by law to accommodations providers or any other entity.

District of Columbia—Property Tax: Budget Act Amends Property Tax Provisions | via Wolters Kluwer IntelliConnect

The District of Columbia has passed the 2023 Budget Act and it includes amendments to multiple property tax provisions.

Increase Limit Amended for Seniors and Disabled Individuals

Residential property receiving the homestead deduction and senior or disabled owner real property tax relief are protected by a cap credit on their property tax bills. Currently, the real property tax cannot be increased annually more than 5% in the property’s taxable assessed value. Beginning October 1, 2022, the residential real property increase for these properties is limited to 2% annually.

Disabled Veterans Deduction Amended

The homestead deduction for disabled veterans is increased to $445,000 (currently, $250,000). Real property receiving the deduction will no longer be eligible for the:

reduction in tax liability for persons over age 65 and for those with disabilities; and
owner-occupied residential tax credit (the homestead deduction).

Additionally, the disabled veterans homestead is exempt from the requirement that a residential property’s taxable assessments cannot be less than 40% of the current year’s assessed value.

Tax Abatement for Downtown Housing

The tax abatement for downtown housing has been amended to:

expand the geographical area for the abatement;
increase the percentage of affordable housing units to 15% (currently, 8%); and
require the Mayor to set the annual amount for the abatement.

Act 24-492 (D.C.B. 24-714), Laws 2022, approved July 25, 2022, applicable October 1, 2022, and effective after a 30-day congressional review period

District of Columbia—Personal Income Tax: Earned Income Credit, Exclusions Expanded | via Wolters Kluwer IntelliConnect

The District of Columbia has enacted a buget for 2023 that makes permanent changes to income tax provisions regarding:

the earned income tax credits; and
gross income exlcusions.

The budget is making permanent the changes enacted earlier this year in emergency legislation.

Act 24-0492 (D.C.B. 24-0714), Laws 2022, approved July 25, 2022, effective after a 30-day congressional review period

IRS Extends Deadline for Amending Retirement Plan or IRA to Reflect Provisions of SECURE Act and Miners Act | via Wolters Kluwer IntelliConnect

The IRS has extended the deadlines for amending a retirement plan or individual retirement arrangement (IRA) to reflect certain provisions of Division O of the Further Consolidated Appropriations Act, 2020, P. L. 116-94, known as the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and section 104 of Division M of the Further Consolidated Appropriations Act, 2020, known as the Bipartisan American Miners Act of 2019 (Miners Act). In addition, the Service has extended the deadline for amending a retirement plan to reflect the provisions of section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), P. L. 116-136.The extended amendment deadline for (1) a qualified retirement plan or Code Sec. 403(b) plan (including an applicable collectively bargained plan) that is not a governmental plan or (2) an IRA is December 31, 2025.

Extension of Plan Amendment Deadline

SECURE Act and Miners Act

The deadlines for amending a retirement plan or IRA to reflect the provisions of the SECURE Act or the Miners Act, as set forth in Notice 2020-68 and Notice 2020-86, are extended as follows:

For a qualified plan (including an applicable collectively bargained plan) that is not a governmental plan within the meaning of Code Sec. 414(d), the deadline to amend a plan for provisions of the SECURE Act, or section 104 of the Miners Act is December 31, 2025.
The plan amendment deadline for a qualified governmental plan, within the meaning of Code Sec. 414(d), is 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023.
The deadline for a Code Sec. 403(b) plan (including an applicable collectively bargained plan) that is not maintained by a public school, as described in Code Sec. 403(b)(1)(A)(ii), to amend a plan for provisions of the SECURE Act or the regulations thereunder is December 31, 2025.
The plan amendment deadline for a Code Sec. 403(b) plan that is maintained by a public school, as described in Code Sec. 403(b)(1)(A)(ii), is 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023.
The deadline to amend a governmental plan under Code Sec. 457(b) for provisions of the SECURE Act or section 104 of the Miners Act is the later of (i) 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023, or (ii) if applicable, the first day of the first plan year beginning more than 180 days after the date of notification by the Secretary that the plan was administered in a manner that is inconsistent with the requirements of Code Sec. 457(b).
The deadline to amend the trust governing an IRA that is an individual retirement account or the contract issued by an insurance company with respect to an IRA that is an individual retirement annuity for provisions of the SECURE Act is December 31, 2025, or such later date as the Secretary prescribes in guidance.
Lastly, amendments to a retirement plan to reflect a provision of the SECURE Act that are made on or before the dates as extended will not cause the retirement plan to fail to satisfy the anti-cutback requirements of Code Sec. 411(d)(6) or section 204(g) of ERISA by reason of such amendments.

CARES Act

The deadlines for amending a retirement plan to reflect the provisions of section 2203 of the CARES Act are extended as follows:

the deadline for amending a retirement plan that is not a governmental plan is December 31, 2025; and
the deadline for amending a retirement plan that is a governmental plan is 90 days after the close of the third regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2023, or, if later, with respect to a governmental plan under Code Sec. 457(b), the first day of the first plan year beginning more than 180 days after the date of notification by the Secretary that the plan was administered in a manner that is inconsistent with the requirements of Code Sec. 457(b).

Notice 2020-68, 2020-38 I.R.B. 567, and Notice 2020-86, 2020-53 I.R.B. 1786 are modified.

Notice 2022-33

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