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The Procrastinators Guide to Tax Day
The Procrastinators Guide to Tax Day
A recent YouGov/Forbes survey indicates that more than half of Americans expect a smaller tax refund this year than in years past, citing pandemic aid programs and general uncertainty as potential reasons for the shift.
As financial advisors, we get asked about taxes all the time. It’s not surprising that you might have questions—there are complicated calculations, a long list of possible deductions, exclusions, and paperwork. Fortunately, tax day only happens once a year, but that also means people are out of practice when the time comes.
So, if you’re still working on filing, what can you do to make it easier on yourself? And who can help you if you have questions? While we recommend talking to tax professionals if you have specific or unique needs, there are many self-help resources out there, too. Here’s our short list of common questions and resources that might come in handy.
What's the Fastest Way to Get My Refund?
According to the Internal Revenue System (IRS), the fastest way to get your refund is to file electronically AND have your refund direct-deposited into your account. Of course, one or the other will help, but doing both will mean a speedier processing time and payment.
Speaking of payment, you can even have some or all of it deposited directly into your individual retirement account (IRA) if you have one. To learn more, review the IRS video all about direct deposits.
How Do Retirement Plan Health Savings Account (HSA) Contributions Affect My Tax Bill?
Saving for retirement can qualify you for several different types of tax breaks. Some retirement accounts lower your tax bill now by deferring the payment until later, when you may be in a different tax bracket.
- You can defer paying income tax on up to $6,000 that you deposit into an IRA.
- With 401(k)s and similar workplace retirement plans, you can defer paying tax on up to $19,500 for 2021, and up to $20,500 in 2022. So, if you plan to fully fund your 401(k) this year, you should adjust now for that extra $1,000 to spread across your remaining paycheck of the year.
- You can also make catch-up contributions if you’re 50 and older, allowing you to save up to $6,500 more in your workplace retirement account or $1,000 more in an IRA. For more ways to reduce your tax bill, visit this article from U.S. News & World Report.
- It’s similar for health savings accounts, too. The maximum HSA contribution for 2021 is $3,600 for those with individual coverage on a qualified high deductible health plan and $7,200 for those with one or more dependents on their plan. Those age 55 and older can also make an additional $1,000 catch-up HSA contribution.
And there’s still time! If you haven’t maxed out contributions yet for the 2021 tax year, you have until Monday, April 18, 2022, to contribute to your IRA and until Friday, April 15, to contribute to your HSA.
Are My Social Security Benefits Taxable?
If you’re retired and collecting Social Security, this may be on your mind. In many circumstances, you may owe taxes on your Social Security benefits. It depends on multiple factors—most importantly, your other income. The amount you owe varies, and taxes might apply only to a portion of your Social Security benefit. To find out more and see how your situation might play out, visit the IRS Interactive Tax Assistant for help understanding whether your benefits will be taxable.
When are Taxes Due, and How Do Extensions Work?
A word of caution from the IRS: An extension to file is not an extension to pay.
For most individual taxpayers, the deadline is Monday, April 18, 2022, to file and pay taxes. Those who need more time to file can request an extension to file. Taxpayers must request an extension to file by April 18, or they may face a failure to file penalty. This extension gives them until October 17 to file their tax return.
Most taxpayers must pay taxes by April 18 to avoid penalties and interest on the amount owed after that date. Taxpayers in Maine and Massachusetts have until April 19 to pay to file their returns due to the Patriots' Day holiday in those states.
How Can I Find Someone Reputable to Help Me With filing?
If you’re uncomfortable doing it yourself or short on time, you may want to find someone to help you file. When looking for a tax professional, it’s a good idea to check the preparer's qualifications and history. You can use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to find out about them, or check with the Better Business Bureau to learn about disciplinary actions and license status.
Worth mentioning is help for dispute resolution, as well. Low-income taxpayers who need help resolving a tax dispute with the IRS may qualify for free or low-cost assistance from a Low-Income Tax Clinic. These clinics are independent from the IRS and the Taxpayer Advocate Service.
Need more help? The IRS has plenty of resources available. Start by watching the video, “Help For Taxpayers” or find the full list of IRS tax tips here.
Investment advice offered through OneDigital Investment Advisors, an SEC-registered investment adviser and wholly owned subsidiary of OneDigital.
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