It’s that time of the year… tax season. For the vast majority of Americans who aren't tax-savvy, dealing with it can be overwhelming. Here's our top tips to make this year's tax returns as stress-free as possible.
Tax filing season is here and many don't know how to file back their taxes. Many tax payers don't fulfill their tax filing responsibilities in due time because they look at the whole procedure and may find the process daunting. But if you don't file correctly, it could cost you big bucks and offset your retirement plan.
Tax Changes from Last Year's Returns
Stimulus Payments: Unlike 2020 and 2021, there were no new stimulus payments for 2022 so taxpayers should not expect to get an additional payment in their 2023 tax refund. Some tax credits return to 2019 levels. This means that taxpayers will likely receive a significantly smaller refund compared with the previous tax year.
Charitable Deductions: This filing season there will be no above-the-line charitable deductions. During COVID, taxpayers were able to take up to a $600 charitable donation tax deduction on their tax returns. However, for tax year 2022, taxpayers who don’t itemize and who take the standard deduction, won’t be able to deduct their charitable contributions.
How Retirement Contributions Impact Your Tax Bill
If you’ve started contributing to a retirement plan, at work or on your own, the next thing you’ll want to know is how to deal with it on your tax return. Fortunately, entering retirement contributions on your tax return, if necessary, is pretty simple.
Generally, you can deduct contributions of up to $6,000 to a traditional IRA ($7,000 if you are age 50 or older by the end of the tax year) on 2021 and 2022 returns.
Other plans have different limits, which vary based on your age and type of plan. They may also be limited based on your income level.
Considerations and Strategies
Tax filing lasts through April 18, three days later than the normal April 15 deadline for filing taxes. April 18 is also the deadline for requesting an extension, which gives taxpayers until Oct. 16 to file their returns for 2022.
If you’re getting ready to file, try adding some of these tips to your tax preparation this season to make filing easier:
Review your income and deductions: Take a look at your income and deductions for the year to see if there are any opportunities to lower your tax liability. For example, you may be able to claim deductions for charitable donations or for business expenses if you are self-employed.
Consider tax-loss harvesting: If you have realized losses on your investments, you may be able to use tax-loss harvesting to offset any capital gains you have realized during the year. This can help to reduce your tax liability.
Contribute to tax-advantaged accounts: Contributions to accounts like 401(k)s and IRAs can lower your taxable income and potentially reduce your tax burden. If you haven't already done so, consider making contributions to these accounts in order to take advantage of the tax benefits.
Review your filing status: Your filing status can affect your tax rate and the amount of taxes you owe. If you are married, consider whether it makes sense for you and your spouse to file jointly or separately.
Take advantage of tax credits and deductions: There are many credits and deductions available that can help reduce your tax liability. Make sure to take advantage of all the credits and deductions that you are eligible for in order to minimize your tax burden.
Remember to consult your financial advisor to ensure that you are taking advantage of all available tax benefits.
Ready, Set, File
Once you have factored in the above considerations, here's how to file your 2022 income taxes:
Start gathering your tax documents: As soon as possible, start collecting all the documents you'll need to file your taxes, such as W-2 forms, 1099s, and receipts for deductions. This will make the process of preparing and filing your taxes much easier.
Use tax preparation software: Tax preparation software can make the process of filing your taxes much easier and more accurate. There are many options available, ranging from free options for simple tax situations to paid options for more complex situations.
Double-check your work: Before you file your taxes, make sure to double-check all the information you have entered to ensure that it is accurate. This will help to reduce the chances of errors and potentially save you time and money in the long run.
File your taxes electronically: Filing your taxes electronically is generally faster and more accurate than filing a paper return. Plus, you'll get your refund faster if you choose to have it deposited directly into your bank account.
By following these tips, you can help to make the process of filing your 2022 income taxes as smooth and stress-free as possible.
Don't Forget to Do Your Homework
Give your future self a hand and prepare for next year’s taxes by considering any and all missteps you experienced this year that made filing your taxes more difficult. For example, making an appointment with your financial advisor, keeping better track of important documents, and updating the amount of tax withheld from your paycheck in the upcoming year can make filing next year that much easier.
While paying attention to tax strategies for your retirement income is important, there is no single right strategy. Read up on the updates to the taxes to make sure you’re familiar with them and fully understand what they’ll mean as you file.
Finally, consult with your Fiduciary advisor to make sure you're not missing out on further tax-strategies that could help boost your retirement savings. From reassessing your investments to postponing RMDs, Agemy Financial Strategies has over 32 years of experience in tax-strategizing to maximize retirement income in your golden years.
Let's put together your personalized plan with a complimentary strategy session. Set yours up here today.