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The Top 3 Last-Minute Tax Tips to Make Before Filing Thumbnail

The Top 3 Last-Minute Tax Tips to Make Before Filing

Tax season can be a busy time for anybody. It can be incredibly overwhelming when you have compensation beyond a straight salary that includes equity, whether through stock, options, or both. So what can you do to make tax season go more smoothly?

Set yourself and your financial team up for success by planning ahead. Doing so will not only reduce your stress but also help you become more "tax-efficient" when the filing deadline is looming. 

Get Organized

Before tax season hits, take some time to get organized and gather all the documents you’ll need to file. Know what documents you need ahead of time, so you aren’t stumbling your way through finding them. Here is a brief checklist to get you started.

  • Know the deadline: April 18, 2022
  • Social security number and other identification materials 
  • W-2
  • Additional earning or interest statements via 1099
  • Stock option information
  • Any adjustments to your income (pre-tax contributions, alimony payments, etc.)
  • Proof of eligibility for tax credits and deductions. This is particularly important for those who received advanced payments for the child tax credit. Be sure to keep IRS Letter 6419 because it will alert you/your tax professional to whether or not you owe any of the credit back. 
  • Charitable giving receipts

At Rivermark, we help our clients get organized because we understand how important and overwhelming it can be. Early every year, we provide them with a personalized list of financial events from the previous year that they can give to their CPA. 

For example, if they super funded 529 plans, they need Form 709. We’ll alert the CPA whether they completed a Roth conversion (and how much they converted), if they sold a rental property, completed a cashless ISO exercise, etc.

Why would we do this? 

Because being organized makes the tax process less time-consuming and stressful. This way, nothing slips through the cracks, and clients can walk into their tax meetings with knowledge and confidence.

Another excellent way to stay organized come tax time is meeting with your CPA or tax professional early in the year—don’t wait until the last minute to start the filing process, especially if you have a complex tax situation. 

Your best bet is to contact your tax professional well in advance of April. Doing so gives them time to prepare—just think about the hundreds of people who contact them a week before the deadline—and ample time to secure your spot on their calendar.

Starting the conversation early also lets them know if there’s anything else they need to complete your taxes. It’s super easy to forget to send over a document or leave an essential receipt at home, so starting early gives you both time to ensure everything is right the first time. 

When you’re confident that you have everything you need, it’s less likely that you’ll need to file an amended return or an extension. 

What’s New (With Life and Taxes)?

Life changes all the time, and believe it or not, but those changes can impact your taxes.

Did you recently get married, enroll your child in daycare, begin caregiving for an older relative, take up a career change flipping real estate property, etc.? 

Those changes don’t just impact the day-to-day of your life; they can also affect your taxes. 

Look back at the past year and note any life changes. Perhaps you changed jobs, which came with a big raise and a hefty compensation structure. Or you recently had a child, and you and your partner are navigating how to balance work and childcare. You may even have found an incredible house and decided to buy it and make it a home. 

Each of these changes could make a difference in your tax bill. If you are a young tech professional, pay particular attention to your equity and stock options because those entities could impact your tax bill, like cashless exercise for ISOs, vesting RSUs, etc.

It’s also vital to consider newly implemented tax changes—keep in mind that these changes don’t always make financial headlines. Some items commonly adjust each year or every few years to keep up with inflation. 

Retirement plan contribution limits often increase, for example. If you plan to maximize them, you need to account for those increased limits. Here’s a recap for 2022:

  • 401(k) limits increased to $20,500
  • HSA limits increased to $3,650 for single coverage and $7,300 for family coverage
  • IRA limits remained the same at $6,000

Deduction amounts can also change. Many, like the standard deduction, change every year. The standard deduction for 2022 is as follows:

  • Single + married filing separately: $12,950
  • Head of household: $19,400
  • Married filing jointly: $25,900

Remember, you’re about to file your 2021 tax return, so you’ll need to adhere to those limits and numbers!

Don’t Miss Savings Opportunities.

A tax year, and therefore the period your tax return covers, is simply a calendar year. However, that doesn’t mean that December 31 is the deadline to take advantage of every possible deduction. 

The IRS allows you to retroactively contribute to IRAs and self-employed retirement plans until the tax filing deadline for that year. That means you can contribute and take the deduction for a given tax year until April of the following year. Take advantage of these "last-minute" contributions if you didn’t max an account during the year. 

In addition to your retirement plans, don’t forget about HSAs. If you don’t have one through your employer, you can open one on your own as well. Like an IRA, you can deduct contributions and have until April to contribute for the prior year.

Tax Time Is Coming, Get Ready Today

The best thing you can do during tax season is to be proactive. Although these "last minute" tips will help you get organized and do what you can to lower your taxable income, it's best to make a plan well in advance of April 18. 

Most people tend to think about taxes by looking backward. While it’s true your tax return is an account of the past, you can affect what goes in the return by looking forward. When you proactively plan to navigate your taxes, it will make tracking them during tax season that much easier. Looking for a way to stay on top of your tax situation all year long?

We’re so excited to let you know that next month, we’ll feature a blog post that helps tech professionals build an annual tax-to-do calendar. Stay tuned! 

If you’d like to talk about your tax situation, let’s schedule some time together today.