2022 Tax Changes

Feb 21, 2023

From Dust to Transfer

The year 2022 has brought about some changes in the tax rules for individuals, and particularly for expats. Here are some of the key changes that expats should be aware of.

Firstly, the US federal income tax rates have been adjusted for inflation. For expats who are US citizens or permanent residents, the standard deduction has increased from $12,550 to $12,950 for single filers and from $25,100 to $25,900 for married couples filing jointly. This means that more income is now exempt from taxation.

Secondly, the Foreign Earned Income Exclusion (FEIE) limit has also increased. The maximum amount of income that can be excluded from taxation for expats who qualify for the FEIE has increased from $108,700 to $112,100 for the 2022 tax year. This means that more expats will be able to exclude a larger portion of their income from US taxation.

Thirdly, while there are no more Covid refunds for 2022, the refundable portion of Additional Child Tax Credit has increased from $1,400 to $1,500. The income thresholds to phase in and out of this credit have remained the same.

Finally, it is important to note many of the thresholds that have not changed despite growing inflation. The filing thresholds for reporting foreign financial accounts on FBAR and Form 8938 have not been adjusted for inflation and remain the same as in previous years.

In summary, the 2022 tax year has brought about some changes that are particularly relevant to expats. These changes include adjustments to federal income tax rates and the FEIE limit, an increased Additional Child Tax Credit, and certain thresholds not being adjusted with inflation. Expats should stay informed and consult a tax professional to ensure that they are meeting all of their tax obligations.

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Many taxpayers receive identity verification notices from the IRS, and in most cases, the process is straightforward and can be resolved without much difficulty.

You have the following options to verify your identity:

Option 1: Verify through the IRS using your ID.Me account

 

Option 2: Use the IRS Document Upload Tool

    • Please note when they ask for the access code answer "no" and put in the notice/letter type 5447C

    • Alternatively, we can upload the documents on your behalf. (Please note additional fees apply.)

For both options 1 and 2:

    1. Allow at least 30 days to process.
    2. You can then check your status on IRS Where's My Refund or request that we pull your transcript.

    Option 3: Call the IRS

      1. Phone number: 1-267-941-1083

      1. When calling the IRS please note that there could be long wait times. We recommend the best time to call is as close to 1PM Israel time as possible, when the lines first open.

    When speaking with the IRS agent:

      • Let them know you are calling in response to a Letter 5447C letter for tax year 202x.

      • Provide the control number as it appears on the first page of the letter.

      • Be prepared to answer any question they ask from the first 2 pages on both tax returns, including:

          • complete address

          • filing status (Head of Household /Married Filing Separately / Married Filing Joint/ Single)

          • refund amount.

      • If you are unsure of an answer you may ask the agent where it can be found on the return.

      • Know the dates of birth for you and the children on the return

      • Know your mother's maiden name

      • If they ask about W-2 income, tell them since you live outside of the US your income isn’t reported on a W-2, but rather the equivalent form 106 instead.

    They hopefully will not ask any more financial questions.

    If your identity is successfully verified during the call, the IRS will typically inform you immediately. Your refund should then be released within approximately 6-9 weeks.

    Documents Required in All Cases

    Regardless of the verification method you choose, you will need:

      • a copy of the 5447C letter you received

      • the first 2 actual 1040 pages of your 202x and 202x tax returns

    Additional Documents for ID.me or Document Upload Verification

    If you are verifying online through ID.me or using the IRS Document Upload Tool, you will also need:

    Two clear copies of acceptable identification, as listed in the IRS letter (for example passport and license).