2022 Tax Updates You Need to Know
Did you know that the tax code is updated every year? In 2022, there are several changes that taxpayers need to be aware of. For example, the deadline for filing taxes has been extended to October 15th due to the ongoing COVID-19 pandemic, and there are new deductions and credits available. This article will discuss all the important changes that you need to be aware of in order to file your taxes correctly. Make sure to bookmark this page and come back later, as we will continue to update it with more information as it becomes available.
Important Tax Filing Questions and Dates to Keep in Mind
When Can I Start Filing Taxes in 2022?
The start of tax season as designated by the IRS began on Monday, January 24, 2022.
What is the Tax Deadline for 2022?
The deadline for filing your taxes in 2022 is October 15th. This is a change from the traditional April 15th deadline, due to the ongoing COVID-19 pandemic. However, you are still able to file for an extension if you need more time. The extension deadline is also October 15th.
Have Tax Brackets Changed for 2022 Filing?
A major change for taxpayers this year is the new tax brackets. The seven income tax brackets that were in place in 2021 have been reduced to six, and the rates have changed slightly. For example, the lowest bracket is now 12%, down from 15% last year. Similarly, the highest bracket is 37%, down from 39.60%.
If I Bought a House in 2021, Do I Get Extra Deductions or Tax Credits?
The short answer is: no. The long answer, though, is more complicated. If you were eligible for the Home Mortgage Interest Deduction (HMD) in 2021, you will still be eligible in 2022. However, there have been some changes to the deduction that may affect your eligibility.
What Should Seniors Have When It Comes to Filing Taxes?
If you’re retired, filing your taxes will look different than if you have a W2 job and there are different steps for tax-filing seniors. There are a few key things to keep in mind:
- You can still file as you normally would, even if you don’t have income from work.
- Social Security and Medicare benefits are taxable, so make sure to include them when tallying up your income.
- If you receive dividends or capital gains, these will also be taxable.
- You can claim a standard deduction of $12,000 if you’re single or file separately, or $24,000 if you’re married and filing jointly.
- If you have any questions about how to file your taxes as a senior, the IRS has a plethora of resources available on their website.
Minimize your Total Income from Retirement Plans (pre tax)
If you have money in a pre tax account, such as a 401(k) or employer-funded pension funds, your withdrawals from these plans after you retire are usually subject to income tax. Finally, the tax rate you pay is determined by your entire taxable income for the year. If you have multiple sources of retirement income, limiting distributions from pre tax plans to only the amounts you require or are penalized for withdrawing in retirement saves on your taxes.
The IRS offers a number of resources for retirees, including Publication 505, Tax Withholding and Estimated Tax. They cover topics such as withholding allowances, estimated tax payments, qualifying widow(er)s with dependent children, pensions and annuities, social security benefits and more. You can also use the withholding calculator on IRS.gov.
What If I Owe Taxes?
Often, filers are surprised that instead of a refund they in fact owe money to the IRS. If you find yourself owing and are not sure how to pay the money, read Can’t Pay Your Taxes? Here Are 5 Tips to Pay the IRS to put together a payment plan.
To avoid this in the future, here are some tips:
- Adjust your withholdings so that you are not withholding too much or too little.
- Try to estimate your taxes as accurately as possible, so you don’t end up owing a lot come April. You can meet with an initial consultation with a financial tax advisor or accountant and they can take a look at your finances and see if you are on track.
- Pay attention to tax law changes, which can affect how much you owe.
Something important to keep in mind: Your taxes owed are due by the tax filing date. Usually this is April 15th, but as mentioned earlier, this date has been extended to October 15th. File your taxes as early as possible so that you are able to put together a repayment plan to ensure you hit the October 15th date.
If you are unable to pay your taxes in full by October 15th, the IRS offers a few different payment plan options. You can apply for a short-term extension (120 days) or a long-term installment agreement. The interest rate on an installment agreement is typically lower than the interest rate charged on penalties and late payments, so that may be the best option for you.
Work with a Tax Preparer to Ensure Accurate Tax Filing
If you own a business, are retired, have multiple jobs, multiple 1099s, or other types of complicated tax paperwork, you will likely need to file taxes with a preparer. You can find free tax preparation options through the IRS or AARP, but be sure to shop around and compare services before you choose one. Finding a fiduciary financial advisor or tax account can take all of the guesswork out of your taxes. Many opt to hire an account so that they don’t have to worry about ensuring that their filings are correct. For many, this is a smart option to avoid any unnecessary complications or issues with the IRS.
Originally published at https://seniorfinanceadvisor.com.