Usually, the tax filing deadline is April 15th. However, due to when April 15th falls this year, April 18th is the deadline to file your 2022 tax return, and it is quickly approaching.
Whether you work with a CPA or another trusted tax preparer, or you're trying to tackle it yourself using TurboTax or some other type of software, you're probably in the thick of collecting forms and information as the deadline nears. You may even feel like you're not able to do much at this stage in the game to impact your liability for last year.
If you're still finishing up your 2022 return, here are three tax tips that you should have on your radar.
Our first tip relates to taking advantage of the retroactive contribution rules for a Health Savings Account (HSA).
In most cases, you are eligible for an HSA by virtue of having a high-deductible insurance plan. Whether or not you maxed out your contribution to it last year, you can do so now. More clearly stated, if you did not max out last year, you can still make a catch-up or retroactive contribution for last year now.
That means, for example, if you are married with children, you are able to contribute up to $7,300, or if you have self-only coverage, you can contribute $3,650 towards a health savings account (for 2022) and reduce that from your taxable income.
Our second tip is to make full use of retroactive contributions to specific retirement accounts. Note that we're not referring to your retirement accounts through your work or employer but a Traditional IRA or Roth IRA.
Like a health savings account, both a Traditional IRA and a Roth IRA can be funded retroactively. This means you can contribute $6,000 for the last year. Those 50 or older can contribute an additional $1,000 to reach $7,000 for 2022.
If you have any self-employed earnings for 2022, you can make a retroactive deductible contribution to a Self-Employed Pension (SEP) IRA. A SEP IRA is a retirement vehicle for folks who have self-employed income, and the contribution amount is generally about 20% of that self-employed income.
You will want to check with your CPA or tax software for the exact specifications, but the bottom line is those contributions can be made retroactively, and they reduce the amount of your taxable income.
Our third and final tip is simple. Make sure that you have gathered all the necessary tax forms from your financial institutions. Investment accounts, retirement accounts, stock accounts, and mutual funds... every one of those is going to generate a tax form for you, and it is essential that you have all of those forms and pass them on to your CPA.
In fact, one of the top reasons why people receive a communication from the IRS six months or so after filing their taxes is not that they have done something wrong but that they didn't turn in one of those forms to their CPA or while filing their taxes.
All of those financial institutions report to the IRS, and if you do not supply all of the tax documents you receive to your accountant, they don't know to put the information on your tax return. That, in turn, makes the IRS look at the difference and send you a letter pointing out that you are missing pertinent financial information on your taxes.
Finally, if you own a business, medical practice, or dental practice, there are likely opportunities for you to take advantage of. A more technical explanation is better suited through a thoughtful conversation with your tax preparer or CPA.
If you are in doubt, or if tax season reminds you that you need to bring some organization to your finances, feel free to reach out to our team at Spaugh Dameron Tenny. We're always happy to connect with you to see how we may be able to help with your financial wellness.
Shane Tenny is the managing partner of Spaugh Dameron Tenny. Along with hosting the Prosperous Doc® podcast, Shane has a true passion for behavioral finance, helping clients and audiences understand how to develop successful strategies based on their unique temperaments. An accomplished and highly engaging speaker, Shane is regularly interviewed for television and podcasts, is actively involved in the Financial Planning Association®, and contributes to industry advisory boards.
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