HOW WILL NEW OCT. DEADLINE AFFECT S.D. TAX FILERS?

San Diegans now have until Oct. 16 to file their federal income taxes. The extension broadly impacts other tax deadlines, including quarterly estimated tax payments and IRA contributions.

Residents of multiple California counties, as well as parts of Alabama and Georgia, have also been granted the extension.

The change, announced Friday by the Internal Revenue Service, is meant to offer “relief to any area designated by the Federal Emergency Management Agency (FEMA) in these three states.”

Along with this gift of more time, there is “a little bit of uniqueness for the San Diego area” when it comes to tax planning, says Levi Anderson, a Certified Financial Planner with EP Wealth Advisors in University City.

The Union-tribune sat down with Anderson to understand what issues might affect people filing taxes in San Diego.

Taxes are due in October this year, not April

San Diegans, along with residents of dozens of other counties throughout California, have six more months to file their federal taxes this year. This applies to residential and business filers.

Federal taxes are now due Oct. 16 for San Diego filers.

Previously, the IRS and the state of California had both extended the filing date from April 18 to May 15. It is not currently known if the state deadline will also move to October.

Why? The deadline was extended for residents of federally declared disaster areas, Anderson said. Tornadoes, winds and severe storms hit Alabama and Georgia in January, leading FEMA to declare them disaster areas. In California, storms in January caused flooding, mudslides and landslides, leading to a FEMA disaster declaration for much of the state, including San Diego County.

In a statement issued Friday afternoon, the IRS provided more information, including how this impacts filers. A few key details:

“Among other things, this means that eligible taxpayers will also have until Oct. 16 to make 2022 contributions to their IRAS and health savings accounts,” the IRS states.

The extension also gives more time for people to file quarterly estimated tax payments.

“This means that taxpayers can skip making this payment and instead include it with the 2022 return they file, on or before Oct. 16.”

The following entities have until this later deadline: Individual income tax returns, originally due on April 18; various business returns, normally due on March 15 and April 18; and returns of tax-exempt organizations, normally due on May 15.

No taxes due on your Middle Class Relief Refund

Are you one of the 7.2 million Californians who got a direct deposit or 9.6 million who got a debit card from the state last fall or this winter?

And when you got that payment, did you worry a chunk of that will go right back to the state as income taxes? Go ahead and exhale now. “Very recently the IRS has come out and said — at least for California and a few other states — that that refund is not a taxable income for federal taxes,” Anderson said. “So that’s a little bit of good news.”

He added that it is not taxable for California state income tax purposes either.

Here’s how the IRS phrased this decision: “During a review, the IRS determined it will not challenge the taxability of payments related to general welfare and disaster relief.”

One drawback to these refunds: They were only given to California residents who filed taxes here in 2020. So if you didn’t file, you weren’t eligible for this support.

Also, if someone moved to California recently, they did not qualify.

“I did not get a payment,” said Anderson. He recently moved here from Texas. But, he added, “I love it here in San Diego. It was really fun to be one of the people that were moving in the opposite direction. The sunshine tax is definitely worth it.”

Relief for San Diego small-business owners

Anderson’s next pointer isn’t new for 2022 taxes, but it’s something that might have slipped under the radar for taxpayers last year when it went into effect.

The change: Starting with 2021 taxes, business owners can change how they pay taxes and lower their individual tax burden as a consequence.

Here’s the backstory: The state and local tax deduction (known as the SALT deduction) is capped at $10,000. But, as Anderson noted, “Many small business owners pay much more than that in state and local taxes.”

He said small businesses that qualify can now pay state and local taxes through their “qualifying pass-through entity” — for example, S corporations or partnerships — which in turn reduces their personal income tax.

According to the state’s Franchise Tax Board:

“For taxable years beginning on or after January 1, 2021, and before January 1, 2026, qualifying pass-through entities (PTES) may annually elect to pay an entity-level state tax on income. Qualified taxpayers receive a credit for their share of the entity level tax, reducing their California personal income tax.”

In other words, “the state of California has provided a workaround to provide tax relief to small business owners,” Anderson said.

Energy efficiency for the (tax) win

San Diego is a hot spot for energy-efficient upgrades, Anderson said, and there are various tax incentives available for people who add solar panels or buy an electric vehicle.

“A lot of folks, especially here in San Diego, are considering solar, or energy-efficient appliances, or electric vehicles,” he said. “The IRS makes provisions for federal tax credits. Some of them are refundable, some are non-refundable. It would be important to check into those.”

• One resource from the state with EV incentives: driveclean.ca.gov/searchincentives

• The IRS lists energy credits and deductions under the Inflation Reduction Act of 2022: irs.gov/credits-anddeductions-under-the-inflation-reduction-act-of-2022

• This site has an overview of federal tax credits that align with a transition to cleaner energy sources: energystar.gov/about/ federal_tax_credits

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