tax filing Archives - The Free Financial Advisor

April is fast approaching and soon, everyone will have to visit their accountants and file their taxes. That said, we need to make sure we are filing taxes correctly. Keeping accurate and up-to-date records is important. Here are some tax tips and how to be well-prepared for tax time.

Contribute to retirement accounts

If you haven’t done so yet, or you’d like to contribute more, you have until tax filing day to do so. For a refresher, here are the contribution limits for some IRAs: IRA/Roth IRA – Max contribution is $6,000 ($7,000 if you’re over 50 or older).

If you have a SEP IRA and you get an extension, you have until October 17, 2022, to make your 2021 contribution.

This is more of a tip for the end of the year, but make sure you take your Required Minimum Distributions. For people that are either over 70 ½ or over 72, depending on when you turned those ages, you need to withdraw money from your IRA. If you don’t, you’ll pay a tax penalty of 50% of the amount you should have withdrawn. For example, if your required amount was $10,000. You’ll pay a $5,000 tax penalty if you didn’t take that distribution.

Make a last-minute estimated payment

If you didn’t pay enough or you didn’t make a payment to the IRS for 2021 taxes, you have until you file to make your payment.

According to the IRS rules, you must pay 100% of last year’s tax liability or 90% of this year’s or you will owe an underpayment penalty.

Get tax docs in order

Get all of your tax documents in order. For earnings for the year, you’ll need one to several forms, depending on what you do for a living and how your business is set up. W2s are pretty common. If you’re an independent contractor, you’ll need 1099.

Itemize your deductions

Most people will take the standardized deduction, which is $12,550 for single filers and $25,100 for married couples filing jointly.

However, if you are self-employed or you have a lot of expenses that are tax-deductible, itemize your deductions. You could save a lot more money IF your total itemized deductions are larger than the standardized deduction.

Home office tax deduction

With the move to work from home still taking place, it might make sense to take advantage of the home office tax deduction. Here are some of the rules:

You must use the space exclusively for business
Expenses related to the space used for business are tax-deductible but need to be calculated according to the amount of square footage used for business
A lot of taxpayers stay away from this deduction, as they think it’s a red flag for an audit. If you’re legitimately using the space as you say and you aren’t fabricating numbers, then you have nothing to worry about

Last-minute tax tips for tax time

Triple-check your work if you prepared your own taxes and file on time. If you’re having someone prepare your taxes on your behalf, make your appointment ASAP because their calendars will fill up really fast.

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Jacob Sensiba

My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com

www.crgfinancialservices.com/

This is a guest post from Eric at Narrow Bridge Finance as part of the Yakezie Blog Swap. This week, we are discussing the topic “Best Tips for Your Taxes.” You can see my post on the same topic at Eric’s site.

People around the United States are in a last minute flurry to find their W2s, 1099s, 1098s, and find the easiest and cheapest way to load all of that onto a 1040. If that sounded like a foreign language to you, don’t worry. Here are some of my favorite tips for navigating tax season.

Tip #1 – File Early

I guess if you are reading this, you probably already missed this one. But there is no time like the present to start planning to avoid next year’s procrastination.

I sent my taxes to my accountant around the end of February. Avoiding the stress of last minute filing can do wonders for your health and sanity. Planning ahead and filing early just makes life easier on you.

Tip #2 – Understand Your Forms

Decoding that foreign language is important. Knowing which tax forms to look for is a big first step. Here are the most common items to look out for:

· W2 – Earnings report from your employer

· 1099 – Miscellaneous income forms. These include bank interest, investment income, and freelance income.

· 1098 – Deduction forms. If you pay mortgage interest or higher education expenses, expect 1098s that you can use to lower your tax liability.

· 1040 – This is the form that you submit to the IRS that summarizes your annual taxes paid, taxes owed, and any refund or additional payment.

Tip #3 – Stay Organized

My taxes this year were two inches thick. Getting everything from my banks, investments, employer, and other income sources is a chore on its own. To stay organized, I made a checklist outlining everything I was expecting and marked forms off as they arrived.

When the form arrived, via mail or online, I filed hard copies in manila folders by type. My personal forms went into one folder and each of my side income sources had its own folder.

Make sure to keep each year separate but filed away in case you need it. It is important to understand how long to keep bank statements and other financial records.

Tip #4 – Understand How Your Taxes Work

You pay taxes every time you get a paycheck. You earn money all the time, and you might not remember it around tax time. To make sure you file correctly and avoid penalties and audits, you should understand how your taxes work.

Take time to learn about itemized deductions versus the standard deduction. Take time to learn about tax brackets. Whether you use tax software to file or have an accountant take care of it for you, you should understand the complexities of your taxes in case you are contacted by the IRS and to make sure you are not overpaying.

Get To It!

Now that you know my best tips, get those taxes done. The filing deadline is swiftly approaching, and you don’t want to get in trouble for being late.

(Photo credit: Tax Sign – 401k, Flickr; Chance Card – OhioProgressive, Flickr)

Tax Tips for Tax Time