Issue 40  April 20th 2022

Reflection on 2022 Tax Season

This tax season was exhausting, challenging and unique in its own way with all recent tax changes. Out of all tax returns that I have completed so far, I had to talk to almost every single client to inquire about third stimulus check or advance child credit. Neither one of those if received are taxable, instead this question is asked so that credit could be claimed if stimulus was not received.

I have still about 20 tax returns that are in the office but have not been touched and about 25 that I have started but could not finish since some information was missing. Once those 45 tax returns are finished, I will be only halfway through all tax return that will have to be done for 2021.

It will be a long and unpredictable rest of the year!

I have decided to keep publishing the newsletter once per month. The newsletter will be going out on third Wednesday of each month. The next issue will go out on May 18th.

Items in Government Development

Here are just a few quick points of what is currently being discussed by those in charge:

• SECURE 2.0 Act - Raising the age for first time taking required minimum distribution from 72 to 73 in 2023, 74 in 2030 and 75 in 2033.
• Mileage rate increase - due to significant increase in gas prices the mileage rate for 2022 will most likely increase (current rate is 58.5 cents per mile).
• 1099-K rules - starting in 2023, third party payment settlement networks must send 1099-K to payees who are payed more than $600 a year for goods and services.
• The IRS hopes to hire 10,000 more employees by the end of the year to deal with the processing backlogs that have plagued the agency since before the start of the year, especially for paper returns.

Question #1

The most asked question by individuals is what they can do to save on taxes If both spouses only have W-2 income. Some of my general recommendations would include: Max out retirement contributions if individual has employer sponsored plan usually 401k or SIMPLE plan. Contributions to those two plans are pre tax deductible which means individual by contributing to a plan is putting money away before they get taxed on it. Maximum 401k contribution for 2022 is $20,500 (plus catch up contribution of $6,500 for individuals over age of 50) while SIMPLE is $14,000 (plus catch up contribution of $3,000 for individuals over age of 50). In addition to employee contribution, employers usually do a match. If individual contributes $20,500 into 401k then employer could match dollar for dollar up to certain percentage (example 3%) of total salary. On $100k salary under employer sponsored 401k total tax free contribution could be $23,500 ($30,000 for individual over age of 50).

Some of the other recommendation would be to contribute into IRA if individual does not have employer sponsored plan. HSA - Health Savings Account would be another recommendation as well as 529 contributions for kids (if they have kids).

Those are just some general recommendations that would be applicable to most everyone.