Five money moves you need to make before the end of 2022 to reduce your chances of higher tax payments
Tax season can be stressful no matter how much money you owe in a regular year, and the recent stresses from sky-high inflation have only added to some concerns about 2023.
Here are five key money moves to make before the end of the year and the start of the 2022 federal tax season to reduce your chances of owing the Internal Revenue Service (IRS) more money.
1. Verification of withholding tax on income 2022
One of the most important ways to avoid paying too much tax when filing your spring tax return is to make sure you’ve paid enough for your income or pension throughout the year.
You can track this by checking if the amount is similar or higher than the amount you paid in 2021.
If you’re still not sure you’ve paid enough, use the IRS online tax withholding estimator.
2. Reduce taxable income
Another important way to reduce your debt to the IRS is to reduce the amount of your money that the government can tax.
There are several ways to do this.
The first is to increase—or maximize, if you have the flexibility—your pension and 401(k) plan contributions.
Adding money to these accounts reduces gross income taxed by the IRS.
December 31 is the deadline to make 401(k) contributions for 2023.
Another option is to take some of your retirement money and invest it in charitable donations.
If you are at least 70.5 years old or older and have non-subsistence IRA funds, taxpayers can donate directly as qualifying charitable distributions United States today.
These donations will not result in any deductions upon your return, but will reduce the amount of your IRA that counts as part of your Adjusted Gross Income.
3. Bundle of Itemized Deductions
In 2017, Congress passed the Tax Reduction and Employment Act Extension of the standard deduction for tax returns.
This made it difficult for taxpayers to itemize each deduction and get a larger tax break.
However, filers can still pool their prints to delete Threshold for a flat-rate deduction – That’s $27,700 for married couples applying together, or $13,850 for singles.
After bundling your prints, you can move on to listing others.
4. Track tax credit eligibility
Ahead of the 2022 tax season, keep track of which tax credits you may be entitled to — or no longer receive.
The most popular credits that applicants may qualify for are the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and the Child and Dependent Care Credit.
It is important to remember these credit levels lose weight after gaining weight due to the coronavirus pandemic.
Those eligible for CTC will now get $2,000 – less than $3,600.
The EITC for individuals will drop from $1,500 to around $500.
And those who receive the Child and Nursing Loan can get as much as $2,100 — less than $8,000.
Other credits that applicants may qualify for are the Premium Tax Credit and the Clean Vehicle Credit.
Meanwhile, other items, such as clean energy improvements, may also earn tax credits on filing.
5. Now get the paperwork together
One of the main reasons the IRS can overcharge taxpayers is if they don’t file their tax returns accurately and on time.
This can result in hefty fees — up to 25 percent, depending on how late the statement is filed.
To avoid this, make sure you file your federal and state tax returns by April 18.
The IRS has already asked taxpayers to organize the necessary paperwork to ensure an easy and smooth processing.
When is the 2022 federal tax season?
The IRS has yet to announce a start date for the 2022 filing season, but is typically accepting returns in late January.
In the 2021 tax season, applicants were allowed to start filing their returns on January 24th.
While applicants typically have until April 15 to file their tax return, that date falls on a Saturday next year.
Also, the following Monday is Emancipation Day – making Tuesday, April 18, the cut-off date for tax season.
The US Sun previously reported what changes taxpayers may see in the 2022 filing season and what documents they will need for their tax returns.
Also, check out our live tracking of various tax refunds Americans are receiving across the country.
https://www.the-sun.com/money/6908148/money-moves-lower-chances-owing-more-tax/ Five money moves you need to make before the end of 2022 to reduce your chances of higher tax payments