If you’re scrambling to file your federal tax return, you’re not alone. Nearly one third of Americans say they wait until the last minute to file, according to the Chamber of Commerce. Here are some tips you need in order to file by Tuesday’s deadline— and your options if you can’t.
Retirees should prioritize tax planning to optimize their retirement income and minimize their tax obligations. Since tax laws are continuously evolving, it's crucial to assess your tax plan at the start of every year.
The deadline to file your 2022 personal income tax return is April 18, 2023. Although it’s normally April 15, since that day falls on a Saturday — and that Monday is Emancipation Day in Washington, D.C. — you have until the following Tuesday to file your taxes.
Are you part of the more than 30% of taxpayers who wait until the last minute to file? Here are some last-minute tax tips to help.
Get Your Documents in Check
Step one is ensuring you have the correct forms organized. Failing to provide accurate information may result in a delay in processing your return by the IRS.
This can lead to unnecessary stress and additional expenses in the form of penalties and interest charges. Many don’t realize that you also reduce your chances of an audit by filing a tax return.
Some of the documents that might be required to complete include:
You will also need your Social Security number and, if you are filing jointly, you will need the Social Security number of your co-filer. Social Security numbers are also required for all listed dependents for whom you are claiming on your return.
To be taxed on your Social Security benefits you need to have a total gross income of at least $25,000, or $32,000 for couples who file jointly. If you earn more than that – at least $34,000 for an individual or $44,000 for a couple – you will see up to 85% of your benefits payments subject to tax. During tax season, all Social Security recipients will receive a Social Security Benefit Statement (Form SSA-1099), detailing the full amount of benefits received in 2022. Use this to calculate your liability for this tax season. However if Social Security is your only form of income then it is not taxable. (If filing jointly, this must be the case for both spouses).
If you are a retiree, there are some additional unique tax forms you need to complete:
Contribute to Tax-advantaged Accounts
One advantage to maximizing IRA contributions for the year is that these accounts allow your retirement savings to grow faster with compound interest. The earlier you contribute, the more time your money has to grow.
While the Dec. 31, 2022 deadline for 401(k) contributions has passed, you can still put money into either traditional or Roth individual retirement accounts (IRAs), up until the tax deadline of April 18, 2023.
Contributions can also be made to employee-based plans including simplified employee pension plan (SEP) IRAs and savings incentive match plan for employees (SIMPLE) IRAs.
Your total contributions for traditional and Roth IRA accounts are limited to $6,000 for 2022. Those 50 and older can contribute an additional $1,000 for a total of $7,000. If you go over, you’ll owe a 6% tax each year on the excess amount in your account, per the Internal Revenue Service (IRS).
Know Which Health Coverage Form You Need
Three versions of Form 1095 exist: A, B and C. Form 1095-A will be sent to you if you get your health insurance through the Health Insurance Marketplace. You will need information from this form to file your tax return, but don’t include the form with your return.
All Americans have to prove that they are currently insured under a qualified health plan. How we all prove this can be quite different. Depending on one’s source of health insurance, a taxpayer must submit Form 1095-A, Form 1095-B or Form 1095-C form to prove one’s access to health insurance. Our incentive is to avoid a hefty, monetary penalty to be deducted from individual tax returns.
If you are unsure of what documents you need to complete, the IRS has a free online interview to determine which form you should use to file your taxes.
Contribute to an HSA
An HSA lets you stash pre-tax cash to pay future medical expenses, health insurance deductibles and co-pays. Like other retirement plans, you're allowed to fund these for 2022 until Tax Day.
Under an HSA, you can contribute up to $3,650 for individual coverage and up to $7,300 for family coverage. An added bonus is that HSAs can earn interest once a deposited minimum is met and those earnings are not taxed.
Be aware that HSAs are limited to those who are enrolled in a High Deductible Health Plan.
File Faster Online
According to the IRS, the majority of individual taxpayers—70%—file electronically, either on their own or via a tax preparer.
Doing so can mean a more accurate tax return, a faster refund and—if every minute counts—the luxury of last-minute filing.
File an Extension!
Need more time? If you aren’t ready to file your tax return, take the extra time and file an Extension. Getting an extension to file is easy. You just need to submit IRS Form 4868 either electronically or by paper. But an extension does not mean you get more time to pay.
You still have to estimate your tax liability and pay that amount by April 18. What's more, the IRS will automatically process an extension when you pay part or all of your estimated income tax electronically.
Stay Up-to-Date on Tax Law Changes
Stay informed about any tax law changes that may impact your retirement income or tax liability. For example, the Tax Cuts and Jobs Act (TCJA) made significant changes to the tax code, including a higher standard deduction and changes to itemized deductions.
But there are some other changes to be aware of before you dive into working on that IRS tax return, according to the IRS website:
Staying up-to-date on tax law changes can help you make informed decisions about your tax planning strategy.
Set Yourself Up for Next Year
Creating a tax plan is a crucial aspect of retirement planning. If this year you find yourself in a crunch before April 18, now is the perfect time to prepare for next year, and ensure you don’t find yourself right back here again.
Whether you’re racing to finish your return or facing questions about other aspects of your financial life, NJM Wealth Preservation Strategies is here to assist you in reducing your tax liability and maximizing your retirement income.
We value our foundation of legal and ethical trust with transparency and have proudly helped thousands of families across our great nation redirect their future by securing their financial well-being.
If you require the services of a Fiduciary advisor to help you with the ongoing tax planning strategies, we are here to assist you. Contact us today to set up your complimentary consultation.