It’s that time of year again – income tax time. If you’ve already filed your return, pat yourself on the back. But if you’re one of the millions who procrastinate, here are some helpful reminders along with some tax changes that you might not have noticed since you haven’t started doing your return:
• Tax Filing Deadline this year is Tuesday, April 18th.
• You can get an extension by filing Form 4868 – but you must pay all the taxes you would owe – or face stiff penalties.
• File your return electronically. Not only will you get your refund faster, you will have proof of filing.
• Electronic filing isn’t more expensive. In fact if your income is under $73,000 you can use IRS.gov/Freefile – a partnership with well-known tax preparers. Of search IRS.gov for the VITA program, an in-person source of help for elderly and low-income people.
• Set up direct deposit if you expect a refund. Double check the bank routing number, and make sure the account you specify is current and open.
• If you insist on filing a paper return, use Certified Mail, with Return Receipt Requested. You’ll have to stand in line at the post office!
If you follow those basic steps to filing, you’ll avoid a lot of aggravation over whether they received your return and where your refund went!
Last Minute Tax Deductions
Right now your biggest question is how you can possibly find more deductions, since the tax year has ended.
Don’t miss this big one: You can still contribute to a traditional tax-deductible IRA for 2022 – up until the April 18th due date of your return. The allowable amount is up to $6,000, or $7,000 if you’re 50 or older.
A reminder: you must have earned income to contribute to an IRA. AND, if you’re also covered by an employer retirement plan, there are income limitations for additional tax-deductible IRA contributions.
If you’re setting up an IRA (or other allowable self-employed retirement plan) for 2022, act quickly because custodians like Fidelity and Vanguard will be swamped in the week before taxes are due. Make sure your contribution is applied for the 2022 tax year.
There are also some important changes on this year’s tax forms:
1. There’s a higher standard deduction this year. For the return you’re filing in April, it’s $12,950 for single filers and $25,900 for joint filers, or $19,400 for heads of household.
But if you’re over 65, the standard deduction is $1750 higher as a single or an additional $1400 each, if filing jointly.
The maximum deduction for state and local taxes (SALT) remains $10,000 per return (or $5,000 if married filing separately).
2. There’s a higher gift tax exclusion — $16,000 for gifts made in 2022. The limit rises to $17,000 for 2023. That means you don’t have to file a gift return for any gifts under that limit.
3. There’s no automatic deduction this year for charitable contributions, as there was during the pandemic. You MUST itemize if you want a deduction.
4. And if you worked remotely this year, pay close attention to state income taxes as each state is trying to grab tax money from employees – even if they moved to a place with no state income tax!
Also this year, you must report any crypto transactions and claim all crypto capital gains and losses on Form 8949 and Schedule D. And for 2022, you must report online sales on Ebay and other popular sites totaling $20,000 or 200 transactions. (In 2023, that limit drops to $600.) If you receive a 1099k this year, you must report that income.
A final note: The IRS promises to give better service this year, now that the pandemic is officially over, though it’s till tough to get an answer or an update. Last year, only 10% of callers to the IRS reached a real person, but their target this year is an 85% live response to questions. It’s better to file correctly the first time, than try to fix problems later.
So unless you have a very simple tax situation, either get free help with your return, or invest in an online tax preparation service. The help you get will be a good investment in peace of mind! And that’s The Savage Truth.