Its that time of year again, everyone’s favorite – Tax Season! Here are 10 last-minute tax-saving tips:
1. Get organized – Many taxpayers are surprised this would be on the list. The reality is thousands of dollars of tax deductions and/or credits get missed because of a lack of organization and record-keeping. No one likes to do accounting during the year (well, except maybe for me) but the truth is being organized and documenting what you dropped off at Goodwill or that medical expense from August could save you.
2. Perhaps your teenager has earned income over the summer from a part-time job. File a return for the child and contribute to a Roth IRA on their behalf up to the amount of their earned income. This way you can help start saving for their retirement with tax-free earnings and even use the money to pay for college. Not to mention, it's a great way for your child to learn about taxes and investing.
3. By this time of year there are very few things a taxpayer can do to lower their income tax liability. But two options are retirement accounts and health savings accounts. Talk to your CPA about which ones you may be eligible to contribute to.
4. Don’t forget about these possible credits related to children. There are additional child credits, adoption expense credits, dependent care credits, earned income credit, and an American opportunity credit. With so many credits see your CPA for which ones you may be eligible for.
5. Many taxpayers qualify for energy improvement credits and don’t realize it. Did you install new doors in the home last year, new windows, insulation, solar? If so, you may be qualified for additional credits.
6. Capture your charitable deductions! In order to qualify as a tax deduction you should maintain contemporaneous records to prove the donations. One often missed deduction is out-of-pocket charitable deductions. For instance driving for a qualified nonprofit, or out-of-pocket expenses for a nonprofit.
7. Are you self-employed and work out of the home? Don’t be concerned about taking the home office deduction. It is a common misconception that more returns are audited because of a home office. If you have no fixed location you can use the home office deduction for administration or management activities even if you don’t meet clients there. Consult your CPA for details.
8. Pay on time. Even if you have to file an extension pay your estimated tax liability by April 15th. Remember filing an extension is not an extension to pay your tax. Penalties and interest will accumulate.
9. If you have a larger-than-expected balance due - do not fret, you can set up an installment monthly payment plan and the interest rate is not terrible. Pay as much as you can by April 15th and you can set up an automatic payment for the balance due each month. I recommend paying your state balance due first as their rates tend to be higher than Federal.
10. Don’t forget to pay your first quarter estimated tax payment for 2023 if required. If you are required, remit quarterly estimates for 2023. Your first payment is due April of 2023. Failure to remit can cause additional penalties.
No one likes taxes but I hope these offer some helpful information as you begin filing your tax returns for 2022. Always consult your tax advisor for any questions and best of all, smile! Chances are they have worked 70 hours already this week and could use it!
Ryan C. Sheppard, CPA
Partner
Rolleri & Sheppard CPAS LLP
Rolleri & Sheppard CPAS, LLP is a full-service public accounting firm. We have large firm resources with a small firm personal touch. We understand every business is different, and your tax and accounting solutions should be tailored as such. We believe in active involvement. We are your business consultants, part of your management team to implement and execute strategies and methodologies to achieve the results.
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