As taxpayers head into 2022, some New Year’s tax resolutions are worth considering
Wolters Kluwer Tax & Accounting looks at what taxpayers can do to make 2022 a better year, at least from a tax perspective.
What: After resolving to eat better and exercise more, taxpayers might also consider resolving to improve their tax situation in 2022. With US Congress still considering significant year-end tax legislation, it is not yet completely clear what the tax laws will look like in 2022, or even in some respects for 2021. Still, a little planning can improve a taxpayer’s tax situation for 2022.
Why: Most of the work involved in preparing a tax return centers on how to maximize the reductions in taxes to which a taxpayer is entitled either through exclusions, deductions, or credits against the taxes owed. Taking the time now to organize for the current and next tax filing season can save taxpayers time and money. Some of the resolutions that taxpayers may consider include the following.
- Organize tax documents. Many of the deductions and credits that taxpayers feel that they are entitled to on their tax return require documented support, some of which may be required to be obtained contemporaneously with a particular transaction. Taxpayers should resolve to assemble these documents throughout the year and keep them in a safe place according to their disaster preparedness plan
- New documents. Taxpayers should resolve to keep track of a variety of new documents they may need when filing their tax return. In addition to possibly receiving Internal Revenue Service (IRS) letters with respect to Economic Impact Payments received in advance for the recovery rebate credit, many taxpayers also received IRS letters with respect to advance child tax credit payments, which will need to be considered in calculating the child tax credit on the tax return. An additional IRS letter - Letter 6419 - on the advance child tax credit payments received by a taxpayer is expected to be sent by the IRS in January 2022
- W-4 form. Form W-4 is the IRS form that taxpayers fill out with their employer when they start a new job and is used to determine how much income tax withholding is withheld from their pay. Taxpayers should resolve to keep their W-4 up to date by revising it for significant life changes such as marriage, birth of children, home purchase, etc.
- Tax deadlines. Taxpayers should resolve to be alert and prepared for tax deadlines. There are deadlines to file returns and pay estimated taxes. There are year-end deadlines to take action for many tax benefits, such as charitable contributions and making maximum 401(k) contributions. There are later tax deadlines to take advantage of certain other tax benefits, such as IRA contributions
- IRS correspondence. Taxpayers should resolve to respond in a timely fashion to IRS correspondence about your tax returns. Waiting too long can result in additional penalties and interest
- Consider hiring a professional tax expert to help with your taxes. Taxes keep getting more complicated. A tax expert can help a taxpayer identify ways to reduce taxes that they may have overlooked and help them honor their New Year’s tax resolutions
Who: Tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, can help discuss the different tax resolutions that taxpayers should consider in order to have a better 2022 from a tax perspective.
PLEASE NOTE: These materials are designed to provide accurate and authoritative information in regard to the subject matter covered. The information is provided with the understanding that Wolters Kluwer Tax & Accounting is not engaged in rendering tax advice or accounting, legal, tax or other professional service.
Contact: To arrange an interview with Mark Luscombe or other federal and state tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topics, please contact Bart Lipinski.
Wolters Kluwer (WKL) is a global leader in professional information, software solutions, and services for the health, tax & accounting, governance, risk & compliance, and legal & regulatory sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services.