12/27/2022
With the year coming to an end, also comes the reminder of the ever-daunting tax filings!
As the year winds down, the tax reporting forms begin to arrive, and we want to remind you which ones we need you to accumulate and send to us with your tax information. First, there is a new form, the 1099-K that many of you will receive this year for things like eBay or Facebook Marketplace sales, and sometimes for simple cash transfers using a cash between friend’s app such as Zelle or Venmo. If you receive a 1099-K this year, please make sure to provide it to us, and be prepared for a phone call and some questions from us so that we can report it properly to minimize income tax or determine that tax does not apply. We still need the annual information forms that are sent to you for tax purposes, we have attached a generic list in this email.
IRS scrutiny of foreign accounts means that you need to be absolutely clear about any non-US accounts or income so that we can report it correctly.
If you have bought and/or sold a home in 2022 we need the closing statements on both the purchase and the sale, as well as a list of improvements (with cost) for any improvements you made to the old home.
Cryptocurrency activities continue to cause major tax problems for people that believe it is not reportable. Bluntly, cryptocurrency is taxable, is reportable, and carries incredible penalties for not reporting, so make sure to discuss it with us, if you dipped your toes in that water.
In order to prepare your return this year we are required to obtain all of your W-2’s, 1099’s from retirement, interest, dividends and brokers, forms 1095 for health insurance, bank forms 1098 and any other official IRS documents, when in doubt, send it to us so we can make sure it has been included!
Deductions
We still need to accumulate the information on your 1) medical, 2) state income and property tax, 3) mortgage interest, 4) charity and other deductions in order to apply the latest rules, and to complete your state tax returns.
For W2 Employees, employee work related business expenses are mostly no longer deductible on the Federal return, but we may still need the information for your state return, and if you incur a lot of these types of expenses, you need to discuss the use of an accountable plan with your employer. With many folks working from home this year, a simple tool to help is to see if your employer has an accountable plan to reimburse you, tax-free, for the business use of your home.
Planning
1. In the current tax era of greatly increased requirements to itemize deductions, a tax “bunching” strategy is absolutely mandatory. The “bunching strategy” recognizes that the best tax deductions are obtained by putting deductions in one year rather than spreading them amongst several years. For example, in years where your charitable contributions are very low, hold off until the next year to catch up, then also pay the full amount of the next year’s contributions in the “catch up” year in order to double your chances of itemizing. Similarly, few Americans receive medical deductions anymore, but if you incur a large expense for say, the deductible on surgery, then try to do all of your other medical items in the same year, such as dental and vision exams, check-ups, etc.
2. Do you have a Health Savings Account? This is one of the single best tax saving plans available.
3. Every year we are told “I pay too much in taxes” or “I want some of the tax loopholes that rich people get”. We can answer both statements with one answer. Rich people get no more tax deductions or “loopholes” then anyone else, they just take advantage of what is there to keep their taxes at a low legal level. The single greatest tax “loophole” that they use, which few average people use to its limit is the ability to defer $20,500 for 2022 into a 401-K if your employer has one. If your employer has a 401-K and you are not putting the maximum deferral in it, there is no reason to even think about other tax planning ideas. But if you are in the 12% tax bracket or lower, this may not be a good idea – please call us to discuss further.
4. Check into your employer’s handbook to see what employer provided fringe benefits are available. Taxpayers are often surprised at the available benefits, or at our explanation of what some benefits really mean. We offer special “tax planning” sessions to go through the handbooks and your paycheck to see what is available and what your options may be, via appointment.
5. College Funding for either your children or grandchildren
6. Planning for your retirement, it is never too early to start thinking about the future!
We are happy to meet with you throughout the year for tax planning, retirement, and similar income tax related issues.
Every year we are reminded how much we value your business, and we want to say once again, THANK YOU.
We look forward to seeing you soon!
