After a two-year extension, tax filing is back in April – and moving fast.
The epidemic led to delays in filing deadlines that extended to late spring or even summer. But this year, the deadline for most taxpayers to file is April 18, with just over a week left.
Even so, owning one is still beyond the reach of the average person. Here are some steps to consider.
There is still time to contribute to a traditional personal retirement account for the 2021 tax year and get a discount – if you qualify. IRA contributions for 2021 can be up to the filing deadline – up to $ 6,000 per person and up to $ 7,000 for people aged 50 and over by the end of 2021. Your discount may be limited depending on your income and your income. Workplace Retirement Planning.
Self-employed individuals can deduct most of their earnings by contributing to a simplified employee pension plan, or SEP IRA. A SEP IRA contribution limit for 2021 is 25 percent of your compensation or $ 58,000 – whichever is less. (You may have more time to contribute to a SEP IRA. If you receive an extension until October 15 to file your tax return, you will have to contribute.)
The deadline to contribute to the Roth IRA for 2021 is April 18 – but since you will not receive a tax deduction for depositing money in Roth, this will not lower your tax bill.
You may also be able to reduce your taxable income by contributing to a Health Savings Account, or HSA, within the filing deadline. To be eligible, you must have a health plan that meets certain criteria, such as a high waiver (at least $ 1,400 per person for 2021), said John Larson, vice president of condom benefits at a business services firm.
If you qualify, the contribution limit for 2021 is $ 3,600 per person and $ 7,200 per family. People 55 and older can contribute an additional $ 1,000.
If you have qualified health coverage for only part of 2021, the maximum contribution you can make may be less, says Rita Asaf, Retired Vice President of Fidelity Investments. For example, if you enroll in a qualified health plan for six months, you can contribute up to $ 1,800 – a maximum of half.
But there is an option that allows you to contribute more to your HSA, known as the “last month” rule, Mrs. Asaf said. Here’s how it works: If you are eligible to contribute to an HSA on the first day of the last month of the tax year – say December 1, 2021 – you will be considered eligible for the full year and can make the maximum contribution. . But there is a catch: you must keep your high-cut health coverage for the next 12 months. If you lose eligibility health coverage before the end of 2022, you will have to pay tax on the additional contributions and possibly a penalty, the IRS says.
The money is an HSA tax-free contribution. If it is withdrawn for eligible medical expenses, it can be tax-free, and investments can be made and federal tax-free. The accounts will go with you if you change employers.
At the state level, few states do not offer the same tax break. California and New Jersey tax HSA contributions, while New Hampshire and Tennessee tax HSA earnings, including interest earned and investment gains, are an HSA provider, according to Lively.
And for those of you who haven’t started calculating your tax and now realize that you can’t create a tax deadline, you can file for an automated extension. This gives you until October 15 to prepare and submit your return.
“If you do not have the information to prepare a complete and accurate return, you may want to increase it,” said Henry Grages, chief manager of tax practice and ethics at the American Institute of Certified Public Accountants.
But an extension of the file does not give you much time to pay. So you have to make the best estimate of how much the government may owe by April 18 and pay the government.
Some people may be worried that they may not be able to pay, so they do not submit a return. But that creates more problems, including fines for failing to file, Mr. Grzes said. He said you should file and pay what you can and then contact the IRS to discuss an installment plan for paying any balance after processing your return. To estimate what you owe, he said, check last year’s return or, if you use the tax software yourself, write down what information you have to get a fair amount.
How do I find a reputable tax payer?
The judiciary has recently warned taxpayers to exercise caution when selecting tax professionals, noting that it has taken action against numerous unscrupulous preparations over the past year. Red flags include manufacturers who ask you to return a blank sign If they refuse to sign the prepared return (known as a “ghost” return), it will not allow you to review your return before filing or submitting your refund in a way that is not clear to you. The IRS offers tips for choosing a manufacturer on its website and a directory of certified manufacturers that can be searched by zip code.
Where can I get free help with tax questions?
The Internal Revenue Service is offering free walk-in assistance – no appointment required – at its Taxpayer Assistance Centers in a number of cities on Saturday, April 9th. The office will not prepare returns, but taxpayers can get answers to questions and get directions.
Free options for tax preparation include IRS free file and volunteer income tax assistance and tax counseling for the elderly. You can search the IRS website for the location.
When is the first estimated tax payment deadline of 2022?
If you are self-employed or otherwise have to pay quarterly estimated taxes, the first payment deadline is April 18. You can use Form 1040-ES to determine how much you owe.