Phew. I can tell you (for my part) that I’m eager to metaphorically turn the calendar page into 2023. The last THREE tax seasons have been fairly brutal for tax professionals, navigating IRS staffing challenges, all of the government relief initiatives, and of course some disruptive changes to the tax code (which could spell tax advantages for you).
Some of these changes might even have occurred after some returns had already been filed, and we needed to go back and amend them.
But this is also what we signed up for, here at Lillian’s Professional Services LLC – change is what we do.
I’ve also seen enough of it, that I’m used to it … but maybe this year (and the past two years) has given you too much of it? I’ve seen more than a few New York/New Jersey Metro clients switch into “change survival mode” and forget to stop and think strategically about their lives.
But we have a little moment here, as we approach the end of the year, to stop and smell the roses – pine-scented candles, that is. A moment for reflection and, with the new year looming, some forward-thinking.
My encouragement to you today – seize the moment and do just that. Especially when it comes to your tax situation.
But it starts with looking back. The changes in your life this year might have changed your standing with the IRS – and I want you to either not be caught off guard by having to pay more OR not miss out on a chance to pay less (maybe a little of both). After all, who doesn’t love a good tax advantage?
If there’s something in here that we need to discuss (whether it’s possible tax advantages or liabilities), you know where to find me …
So let’s break down a few things that might have changed for YOU, this year…
2022 Changes Could Mean Tax Advantages for New York/New Jersey Metro Filers
“Life is what happens when you’re busy making other plans.” – John Lennon
Twelve months is a long time, and a lot happens. It’s easy to lose track of many of the changes you experienced — and easier still to forget the tax implications, several of which could be in your favor — aka tax advantages.
Don’t worry — that’s what we’re here for.
Let’s look at life events that might have changed your tax situation and what you should tell us about before we do your 2022 taxes (and remember: changes can happen right up until the ball drops to ring in 2023).
Work and home
In 2022, did you:
Get a new job? Let’s make sure the withholdings from your paycheck are correct so you won’t get shocked with a big tax bill down the road. Not to mention your new gig might have changed your income tax situation.
Concerning gig income, you’ll get a tax form for 2022 if you made as little as 600 bucks. Get ready to hang onto every tax form that starts coming in with the new year. And if you didn’t have a job or you lost one, we’re afraid that unemployment benefits are taxed by the feds and by many states. Look out for your tax Form 1099-G in January.
Go to school? You may be able to ace the American Opportunity Tax Credit (AOTC) and the lifetime learning credit (LLC). Both act as credit against your taxes owed — but the AOTC can also be part refund too.
Get married? At the very least this alters (*wink*) your tax-filing status — Single, Married Filing Jointly, Married Filing Separately, Head of Household — and that can change your tax situation and many aspects of your planning. Couples who file separately, for instance, often don’t get the same tax deductions and credits as couples who file jointly.
By the way, let the Social Security Administration know if you changed your name when you got hitched, and let the IRS (and the U.S. Postal Service) know if you changed your name and address. Your name, address, and Social Security number must match IRS and state tax records. In addition, you have to file out a new Form W-4 for withholdings from your paycheck.
Untie the knot? If you got divorced, then ditto on the above. Plus you might have to hammer out alimony (for federal taxes no longer declared by the recipient or deducted by the payor), child support, and claiming dependents — that last one also changes who gets goodies like the federal Child Tax Credit and the Earned Income Tax Credit.
We’re here to help you sort all that out.
Incidentally, did you divorce someone who was in bad tax debt? You may qualify for what’s called federal innocent spouse relief. Check with us if you think this might apply to you…
Become a parent? Congrats! Your cuddly new dependent most likely only helps your tax situation and opens the door to tax credits like the CTC and the EITC previously mentioned, as well as the Child and Dependent Care Credit. If you took a child into your home as a new addition to your family, you could also take advantage of the Adoption tax credit.
Sell or buy a home? If you sold your main New York/New Jersey Metro home, you may be able to exclude up to a quarter mil (for Single filers) of gain from your income (half a mil for those Married Filing Jointly). Buy a home? This opens a bevy of tax breaks and deductions, such as for mortgage interest (though you do have to itemize deductions on your return).
Time marches on
Retire? If you started to take Social Security this year, realize that a slice of your benefits — half to 85% — may incur income tax. About 40% recipients pay income tax on at least some of their benefits; the percentage of benefits taxed varies by your tax filing status and how much you make, among other factors.
Are you now withdrawing from your individual retirement account (IRA), 401(k), or other accounts that you carefully built for your golden years? That money incurs income tax unless it’s from a Roth IRA. Also, did you withdraw too early (younger than 59½)? There’s likely a penalty — and we’d be happy to take a look.
Death in the family. Did you lose someone this year? Hard as it is to think about, you, the surviving spouse, executor, estate administrator, or other legal rep of the deceased may have to file their final tax return, in addition to other responsibilities.
These are just a few of the possible tax changes that 12 months can bring and with them the possibility for tax advantages or tax liabilities. And you’ve only got a couple weeks left to adjust things for filing in 2023.
If you’ve got questions, let’s get something scheduled:
I’m here for your tax questions in the old year – and in the new.
In your corner,