Tips for Closing Out Your 2023 Tax Year
The New Year often leads us to look to the future, but, until your taxes are filed, there’s some looking back that becomes necessary. Though 2023 is likely to bring some changes to the U.S. tax codes that may affect your filing next year, you may consider seeking professional advice to ensure that you file the optimal tax return for last year.
For starters, it’s important to note that Tax Day won’t be on April 15 this year thanks to the federal Emancipation Day holiday in Washington, DC. The holiday means that tax returns will be due on April 18, though there may be exceptions in your state for state tax returns.
To ensure that your 2022 tax filing is accurate, consider the following.
Do a “financial health” checkup. Just as you should check in with your primary care doctor once a year, you should also consider a health checkup for your financial affairs. This will allow you to ensure that you’re not paying too much or too little in taxes during the rest of the year. The IRS offers an online tool that will help you check your federal income tax withholding. Consult your state tax guides or with the authorities to check your state tax withholding guidelines.
Evaluate your IRA/401K/HSA Contributions. If you haven’t revisited the amount you contribute to your retirement accounts, now is the time to do so. Annual contribution limits frequently change, or you may have aged into a group that is allowed to put more aside. IRA limits for 2021 and 2022 are $6,000 ($7,000 if you’re over 50) per individual, with Roth contributions subject to an earnings cap.
In addition, if you have access to a health savings account (HSA) through your health plan, contribution limits are $3,600 for individuals and $7,200 for families for 2021 and $3,650 and $7,300 for 2022, with $1,000 more in catch-up contributions for those over age 55. Contributions are by tax year, so you may be able to make a 2021 and a 2022 contribution if you haven’t already met your 2021 contribution limit.
Understand your work-from-home deductions. If you’ve been working from home for your employer, you may be prepared to write off your home office expenses. The bad news is that you can no longer deduct your out-of-pocket expenses as an employee. The new tax law eliminated deductions for unreimbursed employee expenses that might have previously been claimed for home office costs on Schedule A as Miscellaneous Deductions. If you’re self-employed, you may be able to deduct home office expenses.
Maximize your deductions. If you’re looking to reduce your tax burden, be sure you’re claiming all the deductions and credits that are available to you. The process of looking for deductions may also prompt you to make different financial decisions for 2022 and potentially help you reduce your taxes in the future.
Consult a financial services professional. To ensure that you’re maximizing your deductions and getting the most out of your tax filing, consult an experienced tax preparer or financial adviser with extensive hands-on tax history.
At Toomey Investment Management, Inc. (TIMI), our business model is designed to treat all of our clients equally and fairly. We realized long ago that the financial industry dedicated many resources to capture money from prospective clients but very little to require that their advisers develop tax expertise. At Wallingford, Connecticut-based TIMI, we changed that. We strive to achieve your objectives, keep in touch, and return your calls and communications quickly. So you can count on us. We will work effectively to optimize your financial situation and solve your problems. Call us at 203-949-1710 or visit our website for more information.