“I think this is the time of year to really look at those qualified retirement plan deferrals,” said Lance Bradstreet, a partner at Bradstreet & Company CPAs. “It’s a great way to save money.”
Another potential option involves donating to a charitable foundation. Bruce Carter, the owner of Ladd & Carter Tax Service, said that if a taxpayer were to make a cash donation to a nonprofit organization without taking the standard deduction, the donation would become deductible. Carter added that up to $300 can be claimed on a tax return — $600 if a joint return is being filed — from this practice without any additional documentation.
There’s also an opportunity for anyone with a 529 College Savings plan to set themselves up for tax relief in 2022. According to CollegeAdvantage, any 529 plan contributions must be made prior to 4 p.m. on Dec. 30 in order to be grouped with state income tax deductions.
Some new wrinkles to 2021 tax rules will require careful record-keeping, including changes to the IRS’s Child Tax Credit. According to the IRS, eligible taxpayers with a qualifying child automatically received monthly advanced payments totaling half of the credit’s full sum throughout the year.
Carter said that as a result of this initiative, taxpayers should look to letter 6419 from the IRS, which details the total amount of advance payments made from the IRS to the taxpayer. That letter should then be given to the tax preparer as soon as possible, as tax returns could be delayed if an incorrect value is reported.
“The tax preparer is going to have no type of information,” Carter said. “There’s no portal we could go to to check this. And if we put in the incorrect figures, it’s going to hold their return up.”
The COVID-19 stimulus payments that were made to taxpayers through March 2021 require a similar course of action, Carter added. The full amount given to each taxpayer can be found in notice 1444-C from the IRS, which should also be turned over to the tax preparer to avoid refund delays.
These initiatives make it crucial for taxpayers to be organized and accurate, Krupp said.
“I think just like the last few years have been, it’s going to be more critical than ever to report things properly to lessen any potential delays, and therefore reduce any potential phone calls that have to be made to the service centers, because you could be on the phone for hours,” he said.
Bradstreet said that taxpayers should expect few major changes in the paying process during 2022.
“It looks like, relatively speaking right now, the way it is, we are going to be under the same tax laws until 2024, unless they can accomplish a change,” Bradstreet said.
To that end, Carter’s final advice for taxpayers preparing for the new year was simple.
“Just get all the documentation that’s sent to you,” he said. “Regardless if you think it would be helpful to us or not, bring any type of documentation.”
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