In only a few short weeks, 2022 will come to an end. Another year has flown by, even with many of the tax delays and problems. With Christmas on the horizon, many people’s minds are already on the holidays. Still, there are several things you can do to maximize your tax benefits for 2022. Keep reading for our essential end of year tax planning strategies!
Check Your Withholdings
Problems with your W-4 can create delays when you file taxes in the coming year. It doesn’t hurt to double check your current withholding amount before January 1st and make sure it is correct. If you are unsure of what the proper withholding amount is, you have several options. You can speak with a qualified CPA, dependent on what your job title entails. You can also check the amount using the IRS Withholding Tool.
If there is a mistake with the amount, correct it before December 31st. Speak with your employer if necessary and correct the withholding to avoid further complications.
Maximize Retirement Account Contributions
Tax-advantaged retirement accounts are a great way to invest for your financial future. Since these accounts grow exponentially over time, and since the money you place into them is pre-tax, they are a great way to prepare for retirement. They are also beneficial because any money contributed to such an account lowers your overall taxable income.
Every year there are maximum allowable amounts you can donate to both 401K and IRA accounts. If you haven’t yet, maxima your contributions to any of these accounts. If you have a Health Savings Account, you should also maximize contributions to it. This way, your overall taxable income is lowered, and you have diversified your money into accounts beneficial to your future.
Consider Combining Itemized Deductions
Certain deductions can be itemized, such as medical expenses, mortgage interest, and charitable contributions(among others). ‘Bunching’ these deductions may help you reach the minimum threshold to reap the maximum tax benefits. By combining certain deductions, you may be able to reach the threshold in multiple areas.
Empty and FSA Accounts
A Flexible Spending Account is sometimes offered by employers for the purpose of setting aside for medical expenses not covered by insurance. Generally, you set aside a predetermined amount from each of your paychecks to be placed into the account. However, in most cases, rollovers for the next year are limited. Even if a full rollover is allowed, you will be forced to pay taxes on anything in the account after December 31st.
So, if you have one of these FSA’s, schedule any last-minute checkups, eye exams, or any other covered service you can spend those funds on.
Schedule an Appointment with a Qualified CPA
With most of these things, it is beneficial to go over your options with a quality accounting firm. If you are curious about your tax planning options for the end of the year, reach out to Sheffield, Trackwell, and Rapp. Our team knows how to help protect your financial assets and set you up for a successful New year.