Tax Season Tips
5 Tips for the Tax Season Finish Line
We can’t believe it’s already the end of February, and the personal tax filing deadline of April 15th will be here before we know it. Whether you’ve completed your tax return already or, like most of us, are still working on it, here are a few items to consider before filing:
1. Be sure you are using your “Corrected 1099”, if any. The IRS 1099 is the form used by various entities to report income other than W-2. You should have received 1099s by January 31st if you had income in 2023 from sources such as non-employee income, a pension, and/or income from investments. The major exception to the January 31st date is that custodians, such as Schwab or Fidelity, regularly send “Corrected 1099s” by the end of February. So, before you file, be sure to check that you are using the most recent 1099.
2. Make an additional tax payment if you were “under-withheld” for 2023. The IRS website offers a free calculator tool to check estimated taxes/withholdings. The deadline for making estimated tax payments was January 15th, but you can still make a payment for 2023 online or by check. The penalty for under-withholding may cost you more than the late payment, so we recommend going ahead with the estimated payment.
3. Make eligible contributions to Retirement Accounts. You have until April 15th to make eligible contributions for 2023 but make sure you do so early enough so they have time to be deposited:
a. Individual Traditional IRAs and Roth IRAs ($6,500 limit, or $7,500 age 50+)
b. Self-Employed Pension (SEP IRA) (Higher limits, based on net earnings)
c. Savings Incentive Match Plan for Employees (SIMPLE IRA) ($15,500, or $19,000 age 50+)
d. Elective Deferral Plans (401K, i401k, 403b, 457) (Consult administrator for applicable rules. In general, Employer Contribution Only may be made until April 15th.)
4. Revisit the “Home Office” deduction. The eligibility rules for this have been loosened, so if you work from home, revisit the “Home Office” deduction to see if you qualify.
5. File an extension, on time and with payment, if you are unable to complete your return by April 15th. If you need to file an extension, you must do so by the 4/15 deadline, and you must pay any estimated tax due by that date as well. (See item 2 above.)
By following these tips, you can navigate tax season with confidence and enhance your overall financial wellness. Remember that proactive planning and informed decision-making are key to optimizing your tax strategy and achieving long-term financial success.
Need further guidance or want to discuss these tips in more detail?