What You Should Know About the 2022 Tax Season   

Jason Tinsley, market manager at J.P. Morgan Private Bank in Detroit

Photo courtesy of J.P. Morgan 

  

 

   

Michigan has about $47 million in potential refunds from previous tax refunds for eligible residents. Do you qualify? Or have you paid too much in taxes and need to right some wrongs in that discrepancy?   

   

The Michigan Chronicle sat down with Jason Tinsley, market manager at J.P. Morgan Private Bank in Detroit, and talked about what taxpayers should know about filing in 2022, filing with a professional or going solo and more especially during the somewhat-waning pandemic.  

   

Monday, April 18 tax filing deadline to submit 2021 tax returns or an extension to file and pay the tax owed for most taxpayers, according to the IRC.   

   

While it’s too late now to file early (Tinsley recommends filing early the next go-round) residents can still get the best bang for their buck when it comes to getting their returns in a few weeks.  

   

“Sign up for direct deposit it’s more efficient for them and you,” Tinsley said adding that the “government has gotten a lot better” at returning funds on time.   

   

Tinsley, who is not a tax advisor but gives a scope of what taxes can do relative to one’s investment portfolio) said that by following tax law he is a market leader and helps Black families, LGBTQ communities, among others, keep their funds afloat.   

   

“Taxes are an important to people at every step of life and every income bracket,” he said adding that in the space he sits in he notices its daily importance.  

   

   

Like last year, there will be individuals filing tax returns who, even though they are not required to file, need to file a 2021 return to claim a Recovery Rebate Credit to receive the tax credit from the 2021 stimulus payments or reconcile advance payments of the Child Tax Credit, according to the IRS. People who don’t typically file also could receive other credits.   

   

Tinsley added that with filing taxes there are numerous disruptions to the financial ecosystem on the inflation side that he said might not ruffle too many feathers.  

“(There has been) a lot of talk about potential tax law changes in 2022 — we’re super confident nothing is going to change … the problems over in Europe, Ukraine (is) inflation, also with the Supreme Court judiciary track their working on we don’t think anything is going to change that could negatively impact families on any particular income level.”  

Tinsley added that the filing deadline is approaching soon and those who are waiting to the last minute should get all their ducks in a row by Monday, April 18. “We always tell clients the best way to take advantage of tax situation is to make sure you’ve done everything to minimize implication and did you maximize your 401k contributions this year from filing from last year.”  

  

Below are the eight actions to consider to improve your 2022 return:    

  • Maximize contributions to all tax-deferred accounts – The amounts you can contribute to your 401(k) account increased by $1,000 in 2022 (up to $20,500 if you are under age 50, or $27,000 if you are over 50). Also, the amount your employer and you can contribute has risen by $3,000 (to $61,000 or $67,500, respectively, depending on your age).   
  • Consider required minimum distributions (RMDs) and qualified charitable distributions (QCDs) – Before you take your RMDs this year, decide whether you’d want to make a QCD of up to $100,000 to a public charity, in place of all or part of your RMDs. Unlike an RMD, the QCD amount is excluded from your gross taxable income.   
  • Fund charitable gifts with appreciated stock – Many equities appreciated significantly over the last year and it could make it extremely tax-wise to donate those public equities, in kind, to a public charity.   
  • Review your quarterly estimated payments – Review your actual 2021 and anticipated 2022 tax bills to determine your minimum necessary quarterly estimated payments for this year.   
  • Decide which state to call your home for income tax purposes in 2022 – Many taxpayers moved during the pandemic but were not able to get themselves officially declared residents of a lower-tax state, or to minimize the taxes they owed to multiple states. But you have time in 2022 to establish a domicile in the state to which you want to pay taxes this year.   
  • Stay up-to-date on potential federal income tax rate increases – It appears increasingly unlikely Congress will pass legislation in 2022 that would raise tax rates on high-income taxpayers. But even if it did pass such a bill, most individuals with incomes less than $10 million a year or non-grantor trusts that accumulate less than $200,000 a year are likely to be unaffected.   
  • Optimize annual exclusion gifts – Consider making annual exclusion (up to $16,000 per donor, per done) gifts earlier in the year so that any growth on these assets over the year occurs off your balance sheet.   
  • Harvest capital losses – Consider implementing a systematic program harvesting capital losses for your securities portfolios. Doing so might help you to take advantage of any market downturns while avoiding the wash sale rules so adverse to taxpayers—and to bank those losses to offset already realized (or future) capital gains.   

Tinsley added that for tax refund gains consider maximizing one’s 401K.  

“Every dollar you prefund into retirement that is one less dollar for Uncle Sam,” Tinsley said, adding that those taxes are deferred until retirement.   

For example, if a person makes $100,000 a year and puts $19,000 away they are only taxed at $81,000 as opposed to what they don’t put away.  

“People forget and say, ‘I can’t afford to do this,” he said adding that they can’t afford not to when it comes to lessening a tax burden and creating a future income possibility that can be put into a retirement vehicle. “Retirement is the goal. In this day and age, less and less people have access to pensions. (You) want to put as much money away so today’s dollar has a chance to grow.”  

  

“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop these past several months to prepare,” said IRS Commissioner Chuck Rettig. “The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don’t face processing delays. Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year. And we urge extra attention to those who received an Economic Impact Payment or an advance Child Tax Credit last year. People should make sure they report the correct amount on their tax return to avoid delays.”   

  

 

 

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