Tax Items To-Do Before Year End: in Two Weeks
As the year end comes speeding towards us, there are a few last minute tax season items we can perform to help with the 2022 tax filing season.
Check the IRS withholding estimator to verify you have withheld enough income tax for the year. You have time to make the fourth quarter estimate or at least be prepared for tax due on April 15. Do not forget to look at your state tax withholding as well. If you have the option to withhold the tax from your employer or brokerage account, your end of year withholding will satisfy the IRS requirement that payments be made equally throughout the year.
If you employer and plan administrator permit it, adjust your 401(K) to the maximum limit of $20,500 or if over 50, to $27,000. In January you can increase to $22,500 with an additional $7,500 if you are over 50.
Have you spoken with your broker about converting your IRA to a Roth this year? If you have made a plan but not yet executed, you have until the end of the year to concert to a Roth.
Take advantage of your Health Reimbursement Arrangement if you have qualified medical expenses. You can submit for reimbursement of out-of-pocket medical expenses. This is how you deduct all of your out-of-pocket medical expenses.
Consider donating your forced RMD to a qualified charity. Donations that are sent directly from your broker do not get included in your taxable income. This may have the added benefit of lowing income to reduce the tax on social security income, being able to take advantage of deductions that were phased out for income thresholds, and lowering capital gains tax on other investments.
Are you just above the standard deduction this year? Increase your deduction by prepaying deductible expenses and accelerating charitable donations.
Make end of year payroll to your kids or grandkids who are under 18 and work in your business. The FICA withholding is not required, and you get the salary and wage expense on your profit motivated activity.
Contact us to discuss your tax preparation needs.