Oh, so you thought you would be done with the coronavirus in 2022? Unfortunately, the coronavirus has created a ripple effect that will be felt when you sit down to file your taxes for last year. Here are some things to keep in mind:
Unemployment Benefits
After the pandemic stalled a large part of the economy, many Americans found themselves out of work (at least temporarily) and turned to unemployment insurance for help. Though the first $10,200 of unemployment benefits were made tax-free in 2020, that is not the case in 2021 or 2022.15 So if you were unemployed in 2021 or 2022 and did not have taxes withheld from your benefits, plan now to pay taxes on those benefits.
Retirement Plans: 401(k)s, IRAs and More
There were several changes to retirement plans in 2021—and some of those changes could impact your tax bill in 2022 (and potentially 2023). Let’s tackle each of those changes:
The age for required minimum distributions (RMDs) went up. If you own a traditional IRA, you have to take money out of your account once you reach a certain age. Those withdrawals are called required minimum distributions (RMDs). The good news is the SECURE Act changed the age for RMDs from 70 1/2 to 72.16 This extra time could lead to significant tax savings for retirees with those accounts since the money that’s taken out of a traditional IRA counts as taxable income.
There’s no age limit for traditional IRA contributions. The SECURE Act also allows owners of traditional IRAs to keep putting money in their accounts past age 70 1/2 as of 2020.17 Since the money you put into a traditional IRA is tax deductible, you could lower how much of your income is taxed this year. Just remember: You will have to pay taxes on that money when you take it out. Total contributions to all of your traditional or Roth IRAs can’t exceed $6,000 ($7,000 if you’re 50 or older) per year.
If you need help navigating RMDs and IRAs, it’s probably a good idea to reach out to us here at Upward Financial Services who can walk you through the process.
File Your Taxes With Confidence in 2022 and 2023
Win with taxes (and avoid costly mistakes) when you do your taxes with Upward Financial. We are the Top Twin Falls Financial Service Provider that you can trust. It’s simple with no hidden fees and no hidden agenda. We will teach you and educate you along the way, so you feel empowered that your taxes have been done right the first time.
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