Tax Day is fast approaching, and Americans must file a return by April 18 or ask for an extension. If you’re one of the millions who usually wait until the eleventh hour to submit your submission, there’s still time to take steps that can reduce what you owe or get a bigger refund.
Some 91 million people have filed tax returns as of April 1, according to the latest IRS statistics. In a normal year, the tax agency receives about 160 million tax returns, which means that nearly 70 million Americans still had to file their taxes in the last two weeks before the deadline. So far, the typical refund is $ 3,226 in 2022, the agency said earlier this month.
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Strategies that are still open to taxpayers who have not yet filed: Recover money in an individual retirement account (IRA) or a health savings account (HSA), said Eric Bronnenkant, head of tax at Betterment, on CBS MoneyWatch. These strategies can help reduce your taxable income while offering long-term benefits by increasing your retirement savings or triple taxation benefits provided by an HSA.
“The IRA and HSA deadline is the April 18 tax filing deadline,” Bronnenkant noted. “Once you’ve lost them, you can’t get them back.”
Here are some last minute tax moves that can put money in your pocket.
Invest in an IRA
Taxpayers can still invest up to $ 6,000 in an IRA for fiscal year 2021 through April 18, according to the IRS. For people over the age of 50, that amount goes up to $ 7,000 to help older workers save more for retirement.
Traditional IRAs help reduce your tax burden because they can be deductible up to the contribution limit, which means that your taxable income will be reduced by the amount you put into the IRA. At the same time, you will be saving money for your golden years, a fiscally preferred benefit that can have great returns over a career.
“Especially for new employees in the workforce, it can be difficult to invest money, but that can pay off in the long run,” Bronnenkant said.
However, there are some limitations to this strategy. The deduction is fully available for people who are not covered by a retirement plan in their workplace. If you have a retirement plan, such as a 401 (k), your total deduction is limited based on income. For example, a single registrant with a 401 (k) can take the full deduction for an IRA contribution if they earn less than $ 66,000. (See the IRS website for guidelines.)
It is also important to note that Roth IRAs are not deductible, as they operate by investing income after taxes on investment vehicles. In retirement, people can withdraw money without taxes, which is why many tax professionals recommend these accounts to people who expect to be at a higher tax level when they retire.
Save some money on an HSA
The contribution deadline for fiscal year 2021 for health savings accounts is also April 18th. For people who meet the requirements for these vehicles, it can provide a powerful tax advantage.
HSAs are available to people with high-deductible health care plans, which the IRS considers any plan with a deductible of at least $ 1,400 for a person or $ 2,800 for a family.
The IRS says people can save up to $ 3,600 by fiscal year 2021, while families can save up to $ 7,200. Contributions are deductible, meaning you can reduce your taxable income by the amount you put into the HSA. But there are other benefits as well. Money grows tax-free, and money that is withdrawn to pay for medical expenses can be made tax-free.
“It’s the triple tax-free,” Bronnenkant said.
Stimulus Controls – Have You Missed Any?
The IRS also urges people to make sure no federal stimulus money is lost after 2021. The government’s third stimulus check was issued last year, as well as six months of payments tax credit for children. Eligible people who may have lost some of their money can claim it on their tax returns.
Until $ 1.6 billion in stimulus money it may still be at stake, according to a recent report by the Inspector General of Tax Administration of the Department of the Treasury. People who may have been lost include families who had a new child in 2021. This is because the IRS relied on the previous year’s tax return to determine eligibility, which means the tax agency would not have known about children born or adopted in 2021.
To claim incentive cash on your tax return, look for line 30 of Form 1040 for 2021, labeled Recovery Recovery Credit. But make sure you calculate it correctly by checking your records: If you claim money that is not owed to you, your tax return will be marked for review, increasing processing time and a possible delay in receiving refund.
Similarly, if you have missed your child tax advance payments, you can fill out Form 8812 and file your 1040. Again, if you claim money that is not owed to you, your tax return may be delayed. .
Do you have unclaimed refunds from 2018?
Finally, the IRS recently said it has not complained nearly $ 1.5 billion in tax refundsand the tax agency is urging people to act before April 18 to claim the money owed to them.
Unclaimed refunds are linked to about 1.5 million taxpayers who did not file tax returns in 2018, the agency said. As there is a three-year period for claiming refunds, the window to get the money will close on April 18th. (People in Maine and Massachusetts have until April 19, 2022 to claim refunds due to state Patriots Day vacation). .)
Getting the money will require extra work, as the IRS requires people to file a paper tax return for 2018 to get their unclaimed refunds. The agency says check the final page of the current Form 1040 to find out where to return the return. This is organized by state, so taxpayers from Alabama, Georgia, and several other southern states should send their statements to an IRS office in Kansas City, Missouri.
The average value of unclaimed tax returns is $ 813, according to the IRS.
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