Although Americans got a bit of a reprieve when the tax deadline was extended to May 17 last year, this year it’s back to the traditional mid-April deadline. Mark your calendar for Monday, April 18, 2022. If you’re feeling behind, don’t worry – there’s still time to file your taxes. Take a deep breath and follow this guide.
ORGANIZE YOUR DOCUMENTS
Half the battle when it comes to filing your taxes is gathering all the documentation and data you’ll need. This includes last year’s tax returns for reference, a W-2 or 1099 from your employer, along with statements from your taxable accounts, mortgages, or student loans. Many (if not most) of these documents will have come in the mail (or e-mail) clearly labeled as “Important Tax Return Information.” Hopefully, you set them aside when you saw them come in.
“It can be easy to lose track of papers when you get them on January 15, and you don’t need them for another month,” says Terry Eisert, founder and owner of Eisert Wealth Management in Cincinnati, Ohio. If you didn’t put a file on your desk and label it “tax info” or at least start stashing them in your “drawer of important things” or other place where you put stuff you know you’ll someday need, start digging for the papers now.
If you did any freelance or contract work this year, you’ll need to be on the lookout for any 1099 forms that are coming in. (And whether you get a 1099 or not, you’ll need to declare any freelance or “gig” income on your taxes.) And, if you’re planning on itemizing deductions or claiming certain credits, you’ll need supporting documentation. This may include receipts for small-business expenses, for example, as well as for charitable donations.
WHAT’S NEW FOR THIS YEAR: DEDUCTIONS AND CREDITS
There is an increase in the standard deduction to $12,550 for single filers, $25,100 for married couples filing jointly, and $18,800 for heads of household.
The IRS mailed out Letter 6419 to parents who received advance Child Tax Credit payments in 2021. You’ll need this for your taxes. Eligible families who did not get monthly advance payments in 2021 can still get a lump-sum payment by claiming the Child Tax Credit when they file a 2021 federal income tax return.
If you’re one of the 90% of taxpayers who take the standard deduction, you can take a charitable deduction of up to $600 for married taxpayers filing jointly and up to $300 for all other filers for cash contributions made to qualifying organizations.
Remember that 2021 Economic Impact Payment? The American Rescue Plan Act of 2021 mailed checks of up to $1,400 for eligible individuals or $2,800 for married couples filing jointly. These payments also included $1,400 for each qualifying dependent. Like the stimulus checks in 2020, these funds do not count as taxable income.
CONSIDER ADDITIONAL IRA CONTRIBUTIONS
There’s still time to lower your tax bill and put away some additional money for retirement. Tax deductible IRA contributions made through April 18 can still count against your 2021 taxes if you earmark it that way. You can put up to $6,000 into an IRA ($7,000 for those age 50 and older) as long as you earn less than $66,000 as a single filer, or $105,000 for a couple filing jointly. The deductibility phases out as your income increases, and depending on whether you have access to a workplace retirement plan.
Also, if you have 1099 income, you can contribute up to $58,000 in 2021 or 25% of your earnings into a SEP IRA.
SET YOURSELF UP FOR NEXT YEAR
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. If you owed a lot of money, for example, you might want to consider increasing your withholding at work. It’s easy — just talk to HR and ask them for a fresh W-4, on which you’ll elect to have more withheld throughout the year. You can use this withholding calculator if you need help figuring out how much. Also, if there were documents you had trouble finding or you didn’t keep the best records, start making changes now that will make the process even simpler next year.
MORE ON HERMONEY:
- This List Will Save You on Tax Prep This Year
- Tax Filing Tips for Women Who’ve Gone Through Some Stuff
- What To Do If You Can’t Pay Your Tax Bill
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