5 Ways to Plan for Your 2022 Taxes Now
You might feel like tax season barely wrapped up—and you’d be right. However, now is the best time to start thinking about your 2022 taxes and taking steps to prepare for filing your next return. Planning ahead and preparing well in advance of the year’s end can have numerous benefits for you. But how can you start working towards a better tax situation for your 2022 return? Here are a few things you can do right now.
Review Your Withholdings on Your Paychecks
The last several years have caused some sticker shock for taxpayers when they filed their tax returns. Due to changes to various tax laws, tax bills often came back much higher than people were anticipating. If this happened to you, it’s a good idea to review your withholdings on your paycheck. The IRS offers a helpful withholding calculator that makes it simple to calculate just how man exemptions you should be taking on your paychecks. If this does not coincide with what you’re currently having withheld, you can request a new Form W-4 from your employer, update your exemptions, and turn it back in to your HR department. This only takes a few minutes, but it can save you from that unpleasant shock of a high tax bill and prevent a lot of future headaches.
Make Schedule Contributions to Retirement Accounts
Contributing to qualifying retirement accounts are a great, simple way to increase your tax deductions and reduce your tax liability every year. However, many people wait until the very end of the year to make a single lump-sum payment to those retirement accounts. If this is a viable option for you, and you can still maximize your contribution each year with this method, then you don’t need to worry. However, many people may struggle to find the cash to make these large deposits at the end of the year. If that’s the case for you, consider scheduling regular deposits into your IRAs and/or 401(k)s.
These regularly schedule retirement contributions can be easier to manage, and will help you avoid that last-minute scramble to find enough funds to maximize your contribution (and, therefore, your deduction). In fact, if you often find yourself falling short of the maximum contribution, you may even be able to contribute more to these accounts by planning ahead, which means larger deductions on your tax return next year.
Start Organizing Your Tax Documents
How many times have you found yourself digging through old files to find various documents for your tax return? Finding the documents you need to file is one of the biggest headaches associated with taxes. While it’s true that most of the official forms you’ll need to file your return don’t arrive until tax season has officially begun, there are many other types of documents that you should start holding onto now. Doing so will help you have all of your paperwork in order when tax season rolls around.
Examples of forms you should be holding onto include expense receipts for your business, detailed documentation (and receipts, if applicable) of your charitable contributions, mortgage interest statements, qualifying home improvement expense receipts, and more. We strongly recommend that, rather than compiling all of these papers into a physical folder, you digitize these documents and maintain an electronic folder dedicated to tax-related documents. This can be as simple as taking a photo of a receipt and saving it on your cloud drive. Digital copies are much less likely to be lost, and can make it far easier for you (and your accountant) to find what you need when it’s finally time to file.
Educate Yourself on Your Deductions
Tax law is complicated, but it’s important for taxpayers to learn as much as they can about their own tax situations and what deductions they may qualify for. Take some time now to research common tax deductions, credits, and exemptions, so you’re less likely to miss out on any potential tax savings. Even if you’re working with one of our CPAs, we don’t always know the full details of your personal life, and may not be aware that you qualify for a specific deduction. Educating yourself can help you to have more productive meetings with your CPA to ensure you secure every credit and deduction you qualify for.
Schedule a Tax Planning Meeting
Speaking of having those conversations, now is the time to do just that. Schedule a tax planning meeting so we can go over your finances and personal situation in detail and determine steps you can take to potentially reduce your 2022 tax liability. Give us a call today to schedule your tax planning meeting with one of our experienced CPAs.