Six Last-Minute Tips for Filing Income Taxes

Tax time. Bychykhin Olexandr/Shutterstock

The tax-filing deadline on April 18 is looming. And you might be scrambling to prepare your 2022 tax returns. But you can make the process go smoother and more efficiently.

You want to lower your tax burden. It’s still possible, even though Dec. 31, 2022, has come and gone. Here are six tips for filing income taxes that relieve headaches and save on taxes.

Take Time and File an Extension

If you’re not ready, don’t worry—file an extension. It’s better to take your time and ensure you have everything correct than to send in an inaccurate tax return. With this extra time, you can gather additional records and find those deductions you might miss if in a hurry.

And by filing an extension, you'll save that late filing penalty. If you’re in a bind and are late filing, you’re charged 5 percent of unpaid taxes per month or a partial month that it’s late. The cap is 25 percent.

And although you still must pay your taxes by the April 18th deadline, you won’t have that extra penalty. Instead, you'll have until Oct. 16 to file. This should give you plenty of time to organize your return.

Another reason to file an extension, if you are in a bind, is potentially to avoid an audit. The later you file, the less likely you'll receive an audit. That’s because the IRS computers start analyzing tax return issues and questions immediately; it’s a first come, first serve system.

But remember you still need to pay by the April 18th deadline, but you’ll have more time to prepare.

Take Last-Minute Deductions for 2022

Just because Dec. 31 has passed doesn’t mean you can’t take some last-minute deductions for 2022. As long as you take certain deductions by April 18, you can reduce your tax burden.

If you haven’t made the maximum deductions to your traditional IRA or Roth IRA for 2022, it’s not too late. You have until April 18, 2023.

The maximum deduction you can take for 2022 is $6,000. That jumps to $7,000 if you’re 50 or over. The maximum doesn’t apply to rollover contributions or qualified reservist repayments.

Take advantage of a health savings account (HSA) if you have a high-deductible health plan. You‘ll receive a deduction when contributing to an HSA. Just like an IRA, you’ll have tax-free money. The withdrawal for medical care from an HSA is tax free, and the growth your HSA has is tax free.

The IRS allows a maximum contribution per tax year of $3,650 for an individual and $7,300 for a family.

Your employer might have an HSA available to you. If not, contact a bank or credit union and set one up.

Watch Those Qualified Charitable Contributions

If you invest and you’re 70½ or older, you might have taken a qualified charitable distribution (QCD) of up to $100,000 during 2022. The advantage of doing this was the ability to reduce your adjusted gross income.

But, unfortunately, if you’ve also received other distributions besides a QCD, the brokerage firm doesn’t separate it out. In other words, all your distributions are combined on Form 1099-R, so you'll need to make a manual adjustment for the QCD.

For example, if you withdrew $30,000, and $10,000 was for the QCD, the 1099-R will show the entire amount. If you don’t make that manual adjustment, you’ll be paying taxes on the $10,000 as well as on the $20,000.

Hidden Deductions Save Money

This is the time to pull out your documentation for deductions. It’s not only necessary for the IRS in case of an audit but they’re also reminders of what you spent the previous year. Don’t leave money on the table.

Scrutinize your bank statements and receipts. Then, look at your credit card statements. You want to be honest, but make sure you’re taking all the deductions due you.

If you doubt a deduction, discuss it with your tax preparer.

Check for Eligibility on Credits

Ensure you are receiving the tax credits due you. For example, check to see if you are eligible for the American opportunity or lifetime learning credits. These are education-related credits that can save.

Another often-forgotten credit is the retirement savings contributions credit. Also known as the “saver’s credit,” it is available for mid- and low-income taxpayers who contribute to a retirement account. Depending on your adjusted gross income, it could be worth 50, 20, or 10 percent of your contributions.

Several tax credits are available; make sure you research or ask your tax preparer what you’re eligible for.

Review Past Returns

Review last year’s tax returns. It will be a good reminder of what deductions you took. In addition, a lot of the information on the previous year’s return will be duplicated on this year’s.

For example, did you take the mileage deduction or actual expense rate last year for your auto? Unfortunately, you may not always remember unless you look.

Take Time to Prepare Tax Returns

There are many tax credits and deductions that are advantageous for you. Make sure you take the time to do the research.

Check to see if you’re eligible for any last-minute deductions and if additional tax credits are available.

If you’re running out of time, ask for an extension. It’s better for your wallet to take the additional time than miss out on tax savings. Just make sure you pay your taxes on time.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.