4 Last-Minute Tax Tips in 2022

We’re now fully in April, and you know what that means…Taxes and financial literacy month. You might be charging full force to make the April 18th tax deadline (yup, it’s on a Monday). Or, you might be getting ready to conduct a challenge to get your finances in order. 

Here are several last-minute strategies that might be helpful to you, or someone in your network, during this tax season: 

1. Delay paying your taxes.

You may have already come to this conclusion, but if not, consider a delay in filing your taxes IF you have a ton of other expenses you have over the next few months. Now, you will pay interest at on the amount (with a fairly low-interest rate), but if cash is important to you over the next months and you expect a hefty tax bill, you might be better off utilizing the cash for other purposes (especially if having the cash on hand prevents you from taking out debt at a much higher interest rate). You might be used to paying your taxes on time, but sometimes you can benefit from delaying payment. It’s OK - trust me, I’ve done it before and it’s worked out better for us from a timing perspective. 

2. Enjoy the lump sum.

If you expect to get a lump sum payment, go ahead and file to get that money if you haven’t already done so. I want you to think carefully about where you’ll put the money. You have several options - spend it, save it, invest it, or pay down debt. Remember that you always have choices with your dollars. My SIPPin’ and Living strategy (which I spend an entire chapter on in A Wealthy Girl: 7 Steps to Prosperity, Peace, and Personal Power) works for lump-sum payments like taxes or bonuses too.   

3. Know all your tax deduction and credit opportunities.

Nerdwallet released a comprehensive guide on the tax credits and deductions available for the 2021 and 2022 tax years. It’s important to understand how you can benefit from a tax deduction or a tax credit, and the changes from year to year. For example, the 401k tax deduction limit in 2022 moves up to $20,500 per year ($27,000 for those 50 or older). For 2021, the contribution limit was $19,500 ($26,000 if you're 50 or older). But, other deductions like the student loan deduction, have stayed the same at $2,500 for several years now.  

4. Watch out for target-date funds in taxable accounts.

If you have a target-date fund in a taxable account, or an account that is NOT in a tax-sheltered account such as a workplace retirement account like a 401(k)s, or an I.R.A. A recent New York Times article has exposed the big tax bills some people face “because they hold retirement funds run by Vanguard and a handful of other fund companies in taxable accounts.” There is now good evidence that new investors should stay away from target funds in taxable accounts because companies like Vanguard have helped the majority of investors in retirement accounts by cutting their costs on its target-date funds. Unfortunately, the result of this action resulted in much larger tax bills for people who held them in taxable accounts. So, please check with your tax advisor to see if any of your target-date funds in a taxable account will result in a tax bill for you.  

A Wealthy Girl Corner

In the spirit of spring cleaning, please make sure you take some time for yourself to just relax and clear out your mind. Whether it’s meditation or prayer, exercise, or a weekend away with the family (or yourself), hit the reset button now that we’re a quarter of the way into 2022. If you don’t care for yourself, it will be difficult to be wealthy in the way you want to be. I’ve just come back from a getaway in Charlotte with my hubby while the grandparents watched my daughter, and it was a fantastic way to clear my mind.