You may assume that there are no more tax minimization strategies to engage in after December 31. While most of your tax-lowering strategies do come before the new year, there are still steps you can take now, and all the way up until the filing date to make the process easier, and cheaper, and help reduce your tax burden.
For instance, you can still make IRA contributions that are tax-deferred that count towards your 2022 tax year all the way up until the filing due date. Contributing to a traditional IRA removes that contribution amount from your taxable income, leaving less money subject to taxes come filing time. Making a deductible contribution will help you lower your tax bill this year. Plus, your contributions will grow and compound tax-deferred.
If your payments to the IRS came up short, you may face a larger tax bill than you thought given the associated interest and penalty fees. According to IRS rules, 100% of last year’s tax liability or 90% of this year’s tax is owed. Otherwise, you will owe what’s called an underpayment penalty. What’s more is that if your AGI (adjusted gross income) for 2021 was more than $150,000, you must pay more than 110% of your 2021 tax liability to be protected from your tax year 2022 underpayment penalty.
However, there are ways to make sure this predicament isn’t worse for you than it needs to be! The date you need to keep in mind is January 15! If you make an estimated payment by January 15, you can erase penalties for fourth-quarter taxes, but you will still owe a penalty for earlier quarters if you did not send in any estimated payments at that time.
We’re only scratching the surface of ways to help optimize your tax situation. And that’s not to mention the basics such as getting your W2s, 1099s, and itemized deduction files organized well before filing time.
---------
By clicking on these links, you'll leave our server, as they're located on another server. We haven't independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.
This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.