What is your tax plan for 2022? Because it’s that time of year again.
This year, just like any year, if the IRS audits you, you will need to have supporting documentation. But the IRS is dealing with backlogs of unprocessed tax returns that date back to 2020. So, like you, they are also wading through paperwork.
The most important tax planning strategy for 2022 should include keeping all your relevant documentation. You might need these when filing your taxes, and they will play an important role should the IRS audit your returns.
The IRS Says Taxpayers Should File Electronically
Because the IRS has a backlog dating back to the 2020 tax year, they are urging taxpayers to file their 2021 taxes electronically. It is a more convenient system on both sides and adds a layer of security to your paperwork in transit. But this will not put a hold on audits. And the backlog will not impede filing amended returns.
The IRS usually has 3 years from the date you file to auditing your income tax return. This translates into you having 3 years in which to amend your income tax returns.
Which Documents Are Needed?
For the 2021 tax season, you need to keep your W-2 forms. You will also need all of our 1099 forms. We also advise you to keep all forms related to unemployment benefits and freelance income. This is especially important after the last couple of years we’ve had.
You also need to hold on to proof of investment income. These include taxable dividends, interest, and capital gains. Other records include 401 (k) rollovers and any retirement account information.
Additionally, hold off on shredding receipts for any deductible receipts. We recommend you keep these until 2025. Let our team at Saddock Advisory help you understand everything about taxes. We advise you on which documents to keep, and which ones to shred.
Why Being Aware of Tax Deductions is Important
Did you know that the IRS singles out fewer than 1% of individual taxpayers? The IRS audits very few individuals. But you might still need supporting documents to file for an income tax amendment.
Holding onto documentation could come in handy for lowering future tax bills, thus increasing refunds. There’s a chance you might overlook a deduction that could prove useful later.
Have You Overlooked Charitable Contribution Deductions?
We know that there are already so many forms to keep track of, but tracking your deductions can result in many benefits. Perhaps you have overlooked charitable donations.
Taxpayers in 2021 can claim standard cash deductions to charities of up to $300 for single filers. The standard deduction for joint filers is $600 in total. In 2020, this limit was $300 per tax return.
What About Special Circumstances?
The IRS has a period of time after your tax filing date to audit you. This is when you report your income incorrectly (under-report) over 25%. Freelancers often fall into this category, as they can easily lose track of their 1099 forms. This also applies to lottery and prize winners when failing to report their entire winnings.
We advise you to hold on to tax documents for these and other reasons.
Saddock Advisory is here to show you how to file your taxes in 2022. Find out what financial services we offer and how they can help.
Homeowners, Hold Onto Your Paperwork!
It’s a seller’s market for property owners right now. The real estate market has gained a 17% price increase in 2021. Some of the United States cities are gaining even higher price appreciations. This is according to the National Association of Realtors.
The latest trend is for many homeowners to downsize. Those living in their houses for long periods are downsizing to save money.
Are you looking to sell? Or are you planning on investing by purchasing a home? You will need all your tax documents when buying your home. We recommend you hold on to your tax documents for investments like this. You might need proof of purchase until you sell.
What We Need to Learn About the New Child Care Taxes in 2022!
Another thing to be aware of this year is your taxes with regards to dependents. By filing your 2021 tax return, your enhanced child tax credit payment will arrive shortly. Expect this to take place with this year’s tax refund.
- Child care tax credit is improved in 2022. There is an increase in credits that households can claim.
- Claim up to $3,600 per child aged five or younger.
- You can claim $3,000 per child ages 6 to 17.
- You can extend child tax credits into 2022. Expect payments of up to $900.
- Take note payments are no longer monthly.
- Eligible families for expired payouts can still claim in full on their income taxes.
- This will be for the 2022 tax filing year (2023).
Are Older Kids Also Eligible for Child Care Taxes?
Families with older children are also eligible for claiming for Child Care Taxes. For the 2021 tax year, there is an increase from $2,000 to $3,000 for child dependents.
Eligible families need to keep an eye out for letters advising them.
Have I Received Too Much for Child Care Taxes?
You can get a better understanding of your Child Care Taxes from your Letter 6419. The IRS might request a payback for any excess money received.
Advanced Child Care Tax credits received between July to December tallied up to $1,500 or $1,800 per child. The age of the child will determine the amount of Child Care Tax. Most American tax filers receive refunds within 21 days after filing their returns. The 2022 extension is not dissimilar.
The IRS expects to pay advanced payments in 2022. This translates into 35 million households in America receiving ongoing monthly payments. The new American family’s plan could not have come at a better time.
Tax credits are fully refundable. This includes tax cuts and the jobs act tax. Also deductible are medical expenses and health care insurance.
Our team at Saddock Advisory can tell you more about business loss deductions. Find out everything you need to know about excess business loss limitation deductions.
Saddock Advisory is Here To Help!
Saddock Advisory is a partner in your success. We have been in business for 37 years and are well-versed in all things tax planning-related. From general personal taxes to freelancers to investments to real estate to child dependents, we can advise on it all.
Contact us today and get the guidance you deserve today from the team of tax professionals who cares.