Be Prepared This Tax Season
In 1789, Benjamin Franklin famously said, “Nothing is certain but death and taxes.” Not to be outdone, Albert Einstein shared this observation on taxes: The hardest thing to understand in the world is the income tax.” Sadly, those sentiments will likely always ring true. With a new year upon us, it’s time to start preparing to file your income taxes.
Filing Your Own vs. Hiring a Professional
Once you have collected all documents — Social Security documents, income statements, tax deduction records, expense receipts — it’s time to determine whether you will file your own taxes or hire an accountant. The answer depends on the individual.
The more complicated your taxes are, the more help you may need. For example, if you are single with one source of income and rent an apartment, you may be able to either file them yourself or through one of the many tax preparation websites available today. If you are married with children, own a home and have multiple investments, hiring an accountant may be the best idea.
There are many positives to hiring a tax professional. They can help you file your taxes accurately and on time and discover tax deductions and credits for which you are eligible. Hiring a tax preparer, however, can be expensive. Using a credible tax preparation website is generally more affordable. Many are intuitive and review your returns for potential mistakes, which can give you peace of mind. The choice depends on your comfort level and the complexity of your return.
When to File Your Taxes
When filing income taxes, you can start working on them as soon as you have all necessary documents. Once you have all necessary tax forms, you can either give them to your tax preparer or start working on your return. With income taxes, the most important date to remember is April 15, 2022 — the deadline for filing tax returns and making tax payments. If you need an extension, April 18 is the date by which you should submit an individual tax return extension form. Additionally, this is the last day you can make individual retirement account (IRA) contributions for the 2021 tax year.
Key Things to Consider in 2022
Every year, there are changes to income tax laws, including new tax credits and deductions that are available to taxpayers. This year is no different. Key changes for 2022 include:
- The standard deduction increased to $12,550 for single filers and $25,100 for married couples filing jointly.
- Income tax brackets increased for inflation.
- The Child Tax Credit increased to $3,600 for each child under 6 and $3,000 for each child age 6 to 17. If you’re eligible for this tax credit — unless you opted to receive the full credit at tax time — you’ve been receiving a portion of the credit through payments from the IRS since July 2021.
There are many other deductions and tax credits you may be eligible to claim, including charitable, medical and business deductions, the Earned Income Tax Credit and education tax credits. Be sure to discuss these with your adviser before you file your tax return.
Protect Your Identity
As always, it’s important to beware of IRS impersonation scams this tax season. These involve phone calls or emails from someone claiming to work for the IRS. They may tell you that there is an issue with your tax return or that they need to update tax filing information. Be wary of any emails, phone calls or text messages telling you something is wrong with your tax return. If you are worried there is an issue with your return, contact the IRS directly, and be sure to report any tax-related phishing attempts to [email protected].
If you have questions about the 2022 tax season, please be sure to reach out to a qualified tax adviser.