5 Important Tips to be Aware of This Tax Season
Tax season is here, but it looks a lot different than before. Not only have regulations changed, but there are certain steps you should take before you file your taxes that could save you money on your tax liability.
Here are the top 5 tips to help you make this tax season easier than ever before.
1. You have until April 15, 2022, to contribute to your IRA for 2021 taxes
You can contribute up to $6,000 per person to an IRA ($7,000 if you’re over 50 years old). This is one of the easiest ways to lower your tax liability. You get the tax benefit (contribute pre-tax money), and the money will grow over time.
If you haven’t contributed to your IRA yet for 2021, do so before you file your taxes and watch your liability fall.
2. Bunch deductions so you can itemize
It’s hard not to take the standard deduction today since the limits are so high – $12,550 for individuals and $25,100 for married filing jointly couples. But if you have a large number of deductible expenses, try bunching them into one year.
Even if you can only itemize for one year, that’s one year that you get more deductions and have a lower tax liability.
3. Think about a Roth IRA conversion
If you’re nearing retirement and worry about being forced to take Required Minimum Distributions at age 72 and older, consider converting your IRA to a Roth IRA. You’ll pay taxes on the conversion now, but then your funds grow tax-free, and your withdrawals are tax-free too.
You also won’t be required to take a minimum distribution at age 72. Since you already paid your tax liability, you can let the money continue to grow as long as you want.
4. Don’t overlook the home office tax deduction
If you work for yourself, look into the home office tax deduction. Even if you don’t have an office per se, but use your home to conduct your business, you may qualify. You just need a dedicated area that you consider your workspace – it can’t be used for any other purpose.
If you qualify, you can also write off the expenses that pertain to that area, further lowering your tax liability.
5. File your return on time
Don’t ignore your need to file your tax return. If you need more time, file for an extension. It’s easy to do and gives you until October 15 to file your taxes. If you file late, though, always keep up with your payments. Even if you extend your due date, you still owe your taxes on time. If you don’t, you’ll pay a late payment penalty.
Filing your taxes can be complicated, especially if you are self-employed or have a lot of deductions. Letting the professionals at Murtha and Murtha CPAs help you can be the best way you ensure you don’t miss an important deduction, file your taxes right, and most importantly keep your tax liability as low as possible. Contact us a complimentary consultation.