By Aaron Allen, The Seattle Medium
Tax season can be a stressful time for families and individuals, but with the right preparation, it doesn’t have to be. The Seattle Medium recently spoke to Eli Taylor a banker with J.P. Morgan Private Bank to discuss how to best prepare and get the most out of your tax filing experience.
With Tax Day approaching, it’s important to get started on your 2022 returns and submit them well before the April 18 deadline.Taylor recommends giving yourself ample time to gather and organize your tax information to take advantage of any and all tax deductions or other tax breaks that may apply to you and your family. Many key deductions that may reduce your tax bill or provide a refund are often left on the table due to lack of preparation. Whether you file on your own or work with a paid tax professional, the initial groundwork is the key to maximizing your benefits.”
“The starting place is gathering all of your financial documents,” says Taylor. “Think of your W-2s, 1099s, mortgage interest statements, and other relevant paperwork. Once you have all of your important documentation gathered, you should have a system to create organization.”
“What I have learned from my wife is that she kept all of her tax documents organized using label folders, now we have the digital filing system,” says Taylor.
According to Taylor, being aware of tax law changes is a vital component to understanding the tax process as well as protecting your interest.
“While taxes are inevitable, what you may owe or get refunded might not be, and we are not asking customer to be tax law experts, but to the best of your ability stay informed about tax updates,” Taylor advises. “As you finalize or start your 2022 tax return, be aware of changes to federal, state and local tax laws that could affect your refund or how much you owe. For example, if you benefitted from the child tax credit, earned income tax credit or child and dependent care credit on your 2021 return, don’t be surprised if you get a smaller refund this year. Credits expanded as part of federal Covid relief packages have now returned to pre-pandemic levels.”
“The IRS does a very good job at making everything easily accessible for everyone,” continued Taylor. “You can visit the IRS website, subscribe to tax newsletters, talk to tax professional or a Certified Public Accountant, being aware of the latest regulations will help ensure that you are benefitting from all the available deductions.”
One thing that many people may want to think about given the current work environment is whether or not they are working from home permanently? If you have a home-based business, you might qualify for a home office tax deduction. You can potentially write off expenses for a part of your home that you only use for business purposes.
Taylor also notes that it is also important to determine whether or not its beneficial for you to itemize your deductions.
“If you think your qualified expenses will be more than the 2022 standard deduction ($12,950 for most singles and $25,900 for most married couples filing jointly), it might be worth it to itemize,” says Taylor. “Taking the standard deduction can make the filing process easier, but it could mean you pay more in taxes or receive a smaller refund.”
Another way that people can potentially reduce their tax liability is by contributing to a individual retirement account (IRA).
“You can fund a traditional or Roth IRA through the April 18, 2023, tax filing deadline and have it count for 2022,” says Taylor. “Traditional IRA contributions lower your tax bill right now, while your Roth IRA withdrawals are tax-free in retirement. You can contribute up to $6,000 to an IRA each year, or—if you were 50 years or older in 2022—up to $7,000 of your earned income.”
To simplify the process and maximize your potential refund or minimize your tax burden, here are some tips:
• Get organized: Gather all your financial documents, receipts for tax-deductible purchases, travel, charitable contributions, and other potential write-offs.
• Determine what to itemize or not to itemize: Determine whether you’ll itemize your expenses or take the standard deduction.
• Contribute to retirement accounts: You can fund a traditional or Roth IRA through the April 18, 2023, tax filing deadline and have it count for 2022.
• Seek help when you need it: If you have a more comprehensive tax return, it can be a good idea to work with a certified public accountant (CPA). If you need assistance in general, check if you qualify for free in-person or remote programs offered by the IRS or local organizations depending on your income, age, and disability status.
• Go faster by going digital: Filing electronically will get your return to you more quickly than filing by mail.
Need more time? If you can’t file by April 18, you can fill out a Form 4868 that will extend your filing deadline to October 16. An extension to file isn’t an extension to pay, so if you think you’ll owe, plan to submit an estimated payment amount when you file your extension.
“The bottom line,” says Taylor. “Filing your taxes doesn’t have to be difficult. Getting organized now will help make tax season easier this year and put you in better shape for years to come. For more tips to help you make the most of you and your family’s finances,
Visit J.P. Morgan’s U.S. Tax Center at privatebank.jpmorgan.com/gl/en/insights/planning/us-tax-center.
