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Tax Season is Here - Let's Prepare!  Thumbnail

Tax Season is Here - Let's Prepare!

Review our list of actions to take before the IRS filing deadline of Monday, April 18. If you live in Maine or Massachusetts, your filing date changes to April 19.  

  1. Make 2021 contributions to self-directed retirement accounts – Traditional and Roth IRA contributions need to be made prior to April 18. Contribution limits for 2021 were $6,000 and $7,000 for those 50 and older. If you have a SEP IRA or Solo 401(k), the contribution deadline is the due date of your business’ tax return.
  2. Collect your charitable giving receipts.
    •  If you donated to a tax-exempt organization in 2021, you may still write off these deductions, EVEN if you take the standard deduction. Because of the CARES Act, filers who choose a standard deduction may be able to write off up to $300 in charitable contributions. If married filing jointly, you can each deduct $300 for a total of $600. 
    • If you wrote any “Qualified Charitable Distribution” (QCD) checks from your IRA, retain your receipts for your donations and share these with your tax advisor. The 1099-R form from Schwab will show your total distributions from your IRA, with box 2B checked for “Taxable amount not determined.”
  3. Collect all receipts if itemizing deductions or you own your own business. Gather all receipts for business expenses, medical expenses, and other expenses that can be listed on your Schedule A or C. Receipts can include bank or credit card statements that show payment for these items.
  4. Watch for paperwork in the mail – You will likely start to receive the forms you need to properly complete your tax return. A few forms that may be coming your way include:
    • W-2s from your employment
    • SSA-1099 for Social Security benefits
    • 1099s for additional income, interest, gains, and losses
    • 1095-A for government marketplace health coverage
    • 1098s for reporting interest and tuition payments
    • W-2Gs for any gambling winnings
    • Schedule K-1s for company ownership

Looking Ahead

  1. Changes to state and local taxes: In Washington, a 7% long-term capital gains tax went into effect on January 1, 2022. The 0.58% long-term care payroll tax scheduled to begin in the new year is now delayed as the state legislature reviews the terms. Several other states including Florida, New York, and New Jersey enacted new income or sales taxes for the new year. 
  2. Increase in annual gifting: The annual exclusion for gifts increases to $16,000 for individuals and $32,000 for married couples for 2022. 
  3. Backdoor Roth Strategy remains intact: High-income individuals can still skirt the income limits of Roth IRAs via a “backdoor” contribution. The Build Back Better Act included a proposal to eliminate this strategy, but with a delay in the bill’s passing, individuals can still take advantage of the strategy. 

If you have any questions about your taxes or strategies we share, please reach out. 

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