Most taxpayers avoid thinking about taxes until the April deadline approaches each year. Unfortunately, it may be too late to seize certain advantages that increase a refund or decrease the amount owed by then. Taxpayers can prepare now by reviewing these tasks.
Check Individual Taxpayer Identification Number
The IRS issues ITINs to people who are required to have a U.S. taxpayer identification number but who do not have one and are not eligible to obtain a Social Security number. If an ITIN was not included on a federal tax return at least once for tax years 2019, 2020, and 2021, the ITIN expired on December 31, 2022. Individuals only need to renew an ITIN if it has expired and is required on a federal tax return.
Contribute Salary Deferral
Taxpayers can make a salary deferral to a retirement plan, which helps maximize the tax credit available for eligible contributions. Taxpayers should ensure their total salary deferral contributions do not exceed the $20,500 limit for 2022.
Donate to Charity
Most charitable cash donations to tax-exempt organizations qualify for a deduction. However, there are some exceptions. Cash contributions include checks, credit cards, debit cards, or unreimbursed out-of-pocket expenses in connection with volunteer services to a qualifying charitable organization.
During COVID, taxpayers could take up to a $600 charitable donation tax deduction. However, in 2022, those who take a standard deduction may not take an above-the-line deduction for charitable donations. Also, IRA owners age 70½ or over have the option to transfer up to $100,000 to charity tax-free each year. These transfers, known as qualified charitable distributions (QCDs), offer eligible Americans a great way to give to charity before the end of the year. For those who are at least 72 years old, QCDs count toward the IRA owner's required minimum distribution for the year.
Set Up Direct Deposit
Filing electronically and choosing direct deposit gives taxpayers access to their refund faster than a paper check. It also bypasses the possibility a refund check could be lost, stolen, or returned to the IRS as undeliverable. Those without a bank account can learn how to open an account at an FDIC-insured bank or through the National Credit Union Locator Tool. Veterans should see the Veterans Benefits Banking Program for access to financial services at participating banks.
Think about Tax Refunds
Numerous factors can affect the timing of a refund after the IRS receives a return. Although the IRS issues most refunds in less than 21 days, some returns require additional review and take longer to process if IRS systems detect a possible error, missing information, or suspected identity theft or fraud. Therefore, the IRS cautions taxpayers not to rely on receiving a 2022 federal tax refund by a specific date, especially when making major purchases or paying bills.
If you have questions about your unique situation or need strategic financial advice, we are here to help. Contact us to let us know how we can best support you.