Now that the New Year is underway, this means that the new tax season is almost upon us. Tax season is quickly approaching meaning so are deadlines. Make sure you are aware of the deadlines and the possible penalties that can come from not paying or submitting on time. Below, we have outlined a few of the upcoming deadlines for businesses and individuals, and answered some common questions we get about taxes in general.
Due to a national holiday, the deadlines are looking a little different than normal, so make sure you pay attention to the specific dates of the deadlines that apply to you.
Upcoming Quarterly Tax Deadlines
The following information details the quarterly tax deadlines.
Quarter 4 (2021) Taxes deadline
If you are required to pay quarterly estimated taxes, make sure they get postmarked by January 15, 2022 for the fourth quarter of 2021 taxes.
Quarter 1 (2022) Taxes deadline
If you are required to pay quarterly estimated taxes, make sure they get postmarked by April 18, 2022 for the first quarter of 2022 taxes.
Quarter 2 (2022) Taxes deadline
If you are required to pay quarterly estimated taxes, make sure they get postmarked by June 15, 2022 for the second quarter of 2022 taxes.
Quarter 3 (2022) Taxes deadline
If you are required to pay quarterly estimated taxes, make sure they get postmarked by September 15, 2022 for the third quarter of 2022 taxes.
Quarter 4 (2022) Taxes deadline
If you are required to pay quarterly estimated taxes, make sure they get postmarked by January 15, 2023 for the fourth quarter of 2022 taxes.
Other Upcoming Tax Deadlines
Below are the important individual tax deadlines to pay attention to for this upcoming tax season.
Individual Tax Returns Due (for 2021)
Your individual tax returns and tax payments are due April 18, 2022. Usually, this date is the 15th, unless it falls on a weekend or holiday, in which it will be the next business day. This year it is the 18th of April. If you need a deadline extension, the extension form is also due on April 18. By this date, if you have not applied for an extension, you must e-file or postmark your tax returns. The only exception to this is if you live in Massachusetts or Maine. The tax deadline in these states is April 19th, 2022 because the 18th is Patriot’s Day.
Last Day to make an IRA Contribution for 2021
April 18, 2022 is the last day to fund a retirement account for 2021. This deadline applies for traditional and Roth IRAs. Some plans are eligible for an extension, while others are not, so make sure you check to see if your plan is eligible. Again, the deadline is extended until April 19th 2022 if you live in Massachusetts or Maine.
Extended tax return date
If you applied for an extension deadline for your 2021 taxes, the new deadline is October 15, 2022. Make sure that your return is e-filed or postmarked by this date.
Tax Refund Estimates
Estimated 2022 IRS Tax Refund Estimate Date
The estimated date you could be expected to receive your 2021 federal tax refund is January 15th, 2022 to October 15, 2022. This also depends on how quickly the IRS can process your return.
Another thing to keep in mind is that you usually have three years from the tax return date to claim your tax refund. After the three years, if not claimed, the money becomes property of the U.S. Treasury.
Common Questions
Below you can find some common questions others have when it comes to filing taxes and deadlines, along with some tips on how to reduce taxes.
What happens if you miss the tax filing deadline?
If you owe taxes:
If you file your tax return late, you should submit and pay as soon as you possibly can. The IRS charges interest and penalties on returns that are unsubmitted. There are two different types of penalties you could receive from the IRS. The first penalty is known as the failure-to-file or the late-filing penalty. The penalty for failing to file is 5% of the taxes owed for each month over the deadline with the total penalty being no more than 25%. The other penalty occurs when you do not pay your taxes on time. The late-payment penalty is 0.5% of your unpaid taxes each month, plus interest, also up to a maximum of 25%. In order to submit late, you must also pay the balance incurred in penalties and interest to the IRS.
If you are owed a refund:
Most times, if you are still owed your tax refund from the previous year, filing late does not incur a penalty. However, you should file as soon as you possibly can.
What if I cannot afford to pay?
Because of the pandemic, people are struggling more than ever to keep up with bills, mortgages, and payments. This is because of job loss, sickness, and many other things that have been brought on by the pandemic. If you cannot afford to pay your balance, you should look to set up an installment plan to pay the balance. If you choose not to pay, you will incur penalties and interest from the IRS, which could end up costing you more in the long run. Make sure you still submit your tax return on time, even if you cannot pay the whole amount, and then set up a payment plan if you can.
What is the fastest way to get my tax refund?
The first tip to getting your tax refund quickly is by filing your tax return electronically. This helps by getting to the IRS instantly and accurately. This alleviates returns getting lost or delayed in the mail. Filing electronically gives you an instant notification that your return has been submitted to the IRS and is being processed. The second thing to do to speed up your tax refund is setting up electronic payment. When you submit your tax return, choosing direct deposit is the quickest way to get your tax refund. This means your money will go directly into your bank account. Instead of waiting for your check in the mail, you can have it sent electronically. Most electronic refunds are issued by the IRS in less than 21 days.
What if I need an extension?
If you need more time to submit your tax return, you can simply apply for an extension. The IRS allows anyone who requests it to get an extension to file their tax return. Filing Form 4868 will grant you an automatic six-month extension to file your taxes. While this process extends the deadline to submit your return, you are still required to pay the taxes you owe. Make sure that you still do and try to estimate how much you owe. Payment extensions are typically granted to people with special circumstances.
What if I made a mistake when filing my taxes?
If you made a mistake while filing your taxes, no worries. People make mistakes. Luckily, there is an easy fix. All you need to do is file a tax amendment Form 1040X. This form saves you from needing to fully redo your entire return.
When are my state taxes due?
Most states have their tax deadline the same as the federal Tax Day. There are some states though that have separate deadlines. To see when your state tax deadline is, visit the State Tax Agency of your state here State Tax Agencies (taxadmin.org).
How to pay the least amount of taxes?
There is no way to get out of paying taxes. There are, however, some tips to help strategically decrease your taxes. It is important to work with a CERTIFIED FINANCIAL PLANNER™ (CFP®) whose expertise revolves around financial planning, taxes, insurance, estate planning and retirement. A CFP® is also a fiduciary, meaning they are required to make decisions in the best interest of clients. A financial planner can help you go through all your finances, history, and future goals, this will ensure your finances and decisions all match and cohesively come together. Below are some other strategies to help lower your taxes:
Capital Gains
Another way to minimize taxes is through capital gains. Capital gains are the profits from selling a stock at a higher price than the price for which it was purchased.
They are further classified as short term if they were held for less than a year, and long term if they were held for more than a year. According to The Tax Policy Center, which is a joint venture between the Urban Institute and Brookings Institution, which is comprised of nationally recognized experts in tax, budget, and social policy, short-term capital gains are taxed as ordinary income at rates up to 37 percent; long-term gains are taxed at lower rates, up to 20 percent.
Understanding how Social Security is taxed
The amount that you are taxed on your Social Security is based on a few factors including 50% of your actual Social Security, ordinary income which is money from 401(k) or IRA and any earnings you have, and dividends and capital gains along with any non-taxable interest. These components are known as provisional income.
If you are single and your provisional income is under $25,000, then you pay zero taxes on your Social Security. If your provisional income is between $25,000 and $34,000, then half of your Social Security is taxed and if you jump to more than $34,000 in provisional income, 85% of your Social Security is taxed like regular income.
If you are filing as a couple, the provisional income threshold jumps slightly. As a couple, you would pay zero percent on your Social Security if you are making below $32,000. Half of your Social Security would be taxed if your provisional income falls within $32,000 to $44,000 and if you are above the $44,000 threshold, then 85% of your Social Security will be taxed at the normal rate. Looking ahead, planning out your investment strategy, and structuring accordingly will play a pivotal role in minimizing your tax burden.
Required Minimum Distributions
Not all retirement savers who have reached the age of 72 need or want to take, and be taxed on, distributions from their 401(k) or IRA. There are a few ways to reduce and significantly minimize the tax burden on your portfolio.
Strategies include:
- delaying retirement,
- converting from a traditional IRA to a Roth IRA which has different tax policies,
- and/or limiting the number of initial distributions
Because each person’s financial portfolio is unique, so are their financial goals and circumstances. Therefore, working with someone who understands your unique positioning will help you create a comprehensive plan that works for you.
Proper allocation of assets
An overall asset allocation strategy has the potential to significantly reduce your taxes. Consider which assets should be held in which accounts and align each of those accounts with your specific investing goals. The tax structure varies per account – some are subject to taxes every year, while others offer differing tax advantages. The three main investment accounts include taxable accounts, tax-deferred accounts and tax-exempt accounts. Taxable accounts are traditional brokerage accounts (mutual funds, stocks, bonds) that are taxed when you earn dividends or on capital gains, the increased value from when you initially make the purchase. Tax-deferred accounts refer to traditional 401(k)’s and IRA’s which tax your money when it is withdrawn as ordinary income. And lastly, tax-exempt accounts like Roth IRA’s require income taxes to be paid on the contributions initially, but then further taxes are avoided if certain rules are met.
Hopefully some of these answers help you, but if you still have questions, feel free to email us at [email protected].
