Tax Day is tomorrow! Are you prepared? These last-minute tax tips will help you handle Tax Day like a pro and potentially save you some cash and stress along the way.
We all dislike paying taxes. Still, the saying coined by Ben Franklin more than 200 years ago—“Nothing is certain except death and taxes”—rings true today: Taxes are inevitable. The sooner you get started, the better prepared you’ll be.
The deadline to file your 2022 personal income tax return is April 18, 2023. Although it’s normally April 15, since that day falls on a Saturday — and that Monday is Emancipation Day in Washington, D.C. — you have until tomorrow to file your taxes.
It’s crucial to have a solid understanding of the implications your taxes will have on your future income– especially when it comes to retirement savings. So, if you’ve left your taxes for the very last second, or you want to make sure you filed correctly, here are some last-minute tax tips that could save you some money and headaches.
Having The Correct Forms
When filing your tax return, having the correct tax forms is crucial. Failing to provide accurate information on tax forms may result in a delay in processing your return or even trigger an audit by the IRS. This can lead to unnecessary stress and additional expenses in the form of penalties and interest charges.
Everyone’s tax return will look different, but generally, most consumers will need one or more of the following documents:
- W2 or 1099-MISC (income earned from work)
- 1098 (mortgage interest deduction)
- 1098-E (student loan interest deduction)
- 1098-T (paid tuition deduction)
- 1099-DIV (dividends and distributions)
- 1099-INT (interest earned from bank accounts)
- 1099-G (government payments)
Moreover, you may miss out on tax deductions and credits that could help reduce your tax liability by not filing the right forms.
Senior Citizen and Retiree Forms
Senior citizens are largely subject to the same tax requirements as other adults. There is no age at which you no longer have to submit a tax return and most senior citizens do need to file taxes every year.
Some common tax forms that seniors and retirees may need to file include:
- Form 1040 or 1040-SR: Form 1040-SR is available as an optional alternative to using Form 1040 for taxpayers who are age 65 or older. Form 1040-SR uses the same schedules and instructions as Form 1040 does.
- Social Security Benefit Statement (Form SSA-1099): To be taxed on your Social Security benefits you need to have a total gross income of at least $25,000, or $32,000 for couples who file jointly. If you earn more than that – at least $34,000 for an individual or $44,000 for a couple – you will see up to 85% of your benefits payments subject to tax. During tax season, all Social Security recipients will receive a Social Security Benefit Statement (Form SSA-1099), detailing the full amount of benefits received in 2022. Use this to calculate your liability for this tax season. However if Social Security is your only form of income then it is not taxable. (If filing jointly, this must be the case for both spouses).
- Forms related to retirement accounts (such as Form 5498 and Form 1099-R). These forms cover distributions from pensions, annuities, IRAs, retirement, and profit-sharing plans
You can use this Interactive Tax Assistant to get retirement income information. Further common income documents to file could include:
- Forms 1099-DIV for dividends and distributions
- Forms 1099-INT for interest income
- Forms W-2 from part- or full-time employment
Filing Tip: It’s extremely important to enter your Social Security Number(s) in the appropriate boxes on the forms. Otherwise, the IRS may be unable to process your return. The Iowa Department of Revenue may require proof of any item listed on a return or schedule.
Who Must File?
You must file an Iowa return if you were a resident or part-year resident of Iowa in 2022 and meet any of the following requirements. In meeting the filing requirements below, you must add back:
- the pension exclusion (line 21, IA 1040)
- the reportable Social Security amount from step 4, IA 1040
- any amount of lump sum distribution separately taxed on federal form 4972, and
- any net operating loss carryforward
If you’re married and filing jointly, remember to include your spouse’s forms, as well. See the table below for more information:
|Age At The End of 2022
|File a Return if Your Gross Income Was at least…
65 or Older
|Head of Household
65 or Older
|Married Filing Jointly**
|Under 65 (Both Spouses)
65 or older (One Spouse)
65 or older (both Spouses)
|Married Filing Separately
|$5 (yes, $5!)
|Qualifying Surviving Spouse
65 or Older
Iowa Tax Breaks
House File 2317 was signed into law by Governor Kim Reynolds on March 1, 2022. Among its provisions, Division VI states that eligible taxpayers will no longer need to include their retirement income as part of their Iowa taxable income for tax years commencing on or after January 1, 2023.
To better understand these changes, it’s crucial to determine the individuals who qualify for the retirement income exclusion and the types of retirement income that are eligible for the exclusion.
To qualify for the retirement income exclusion, the taxpayer must be:
- 55 years of age or older on December 31 of the tax year.
- Surviving spouse or anyone with an insurable interest, such as sons, daughters, mothers, or fathers of the annuitant or pensioner, who qualified for the exclusion based on age or disability.
The retirement income exclusion for married couples applies only to a spouse who meets the age or disability requirements mentioned earlier. If one spouse fails to meet these conditions, their retirement income cannot be excluded. However, if both spouses meet the eligibility criteria, they can exclude all eligible retirement income.
What Retirement Income Qualifies for the Exclusion?
As of now, the Department has determined that distributions from the following plans qualify for the exclusion:
- Distributions from individual retirement plans (IRA) authorized under section 408 of the Internal Revenue Code (IRC)
- Distributions from a simplified employee pension (SEP) plan;
- Distributions from a savings incentive match plan for employees (SIMPLE) retirement plan;
- Distributions from a Keogh plan;
- Distributions from qualified pension plans as described in Treasury Regulation section 1.401-1(b)(1)(i), including IPERS;
- Roth conversion income;
- Distributions from qualified deferred compensation plans governed by the Employee Retirement Income Securities Act (ERISA) including a 401(k), 403(b), and 457(b) plan;
- Annuity distributions pursuant to IRC section 402(a).
- Distributions from an Employee Stock Ownership Plan (ESOP) as defined in section 4975(e)(7) of the IRC
If you have questions about whether a plan not listed above qualifies under the retirement income exclusion, please submit a tax guidance request.
E-File for the Fastest Refund
If you’ve left your return to the last minute, filing your return electronically, known as e-filing, is the easiest, fastest and most reliable method. According to the IRS, you also get the fastest possible refund when you use e-file to submit your return and choose direct deposit to receive your refund. In fact, you get your refund weeks earlier when you e-file online than when you file on paper.
You can file taxes online for free with IRS Free File if your adjusted gross income is $73,000 or less. If your income is higher, you can still use Free File fillable forms and file on your own. Alternatively, there are a number of reasonably priced tax preparation software programs or services you can use.
Future Tax Planning With Johnson Wealth and Income Management
Nobody wants to pay more taxes than necessary. For retirees, and those still in the workforce, the best way to help minimize taxes is to have a strategy in place. This is commonly referred to as tax planning.
At Johnson Wealth and Income Management, we offer tailored services to help maximize your retirement income and help minimize your tax burden. Our Fiduciary advisors are committed to providing customized tax planning solutions that help you achieve your financial objectives. With careful and consistent preparation, you may be able to manage the impact of taxes on your financial efforts.
For more information and to set up a complimentary strategy session, reach out to us here today.
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