February 22, 2023

Getting Your Tax Act Together

In Tax Planning, Wealth Strategy

Vince Lee
Contributions from: Vince Lee, CFP®, CPA

Over the past several weeks, you probably noticed copies of your tax documents for the 2022 year arriving in your mailbox. We’ve put together this consolidated checklist as well as some questions and tips below to help sort and organize your tax records in preparation for your upcoming tax return. Taking time to ensure your records are complete and accurate will help you avoid any processing or refund delays — or worse, a letter from the IRS.

Income and Investment Sources

  • Review the sources of income reported on your 2021 tax return and confirm that you have a corresponding 2022 Form W-2, 1099, or Schedule K-1.
    • If not, could it be the account was closed in 2021? Consider also if you opened any new accounts in 2022 or started a new job or business.
    • K-1s may not arrive until the second half of the year so make sure you are aware of all the K-1s you should receive before filing.
    • For investments sold in 2022, please review your Form 1099-B to ensure the basis of your investments sold are correctly listed. Investments sold with a basis of zero means the custodian/brokerage firm is not responsible for reporting the cost basis information to the IRS and you are responsible for reporting the cost basis information when you file your taxes.

Standard vs. Itemized

  • Five years ago, the standard deduction was increased substantially and many taxpayers that used to itemize their deductions are no longer eligible. Do a quick math calculation to see if you can itemize before collecting all your receipts.
    • If the total of your mortgage interest, charitable gifts, state and local tax (capped at $10,000), medical expenses in excess of 7.5% of AGI, is less than your standard deduction amount, you are not able to itemize.
    • For the last few years, taxpayers who claimed the standard deduction were able to deduct up to $600 charitable above-the-line deduction. However, for 2022, those who take a standard deduction will no longer be able to take this above-the-line charitable deduction.

Make Sure You Get Credit

  • Potential Tax Credits
    • Did you purchase an electronic/hybrid vehicle?
    • Did you have any major home improvements (i.e., heat pumps, water heater, windows, solar)?
    • Did you have expenses for child daycare?

It’s important to note that April 15th falls on a weekend this year with the subsequent Monday being recognized as a holiday. Therefore, the deadline for filing individual federal tax returns is April 18th, 2023.  If you have any questions or would like to discuss your unique tax situation further, please reach out to your Coldstream wealth management team.

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