How to Maximize Your Tax Refund This Tax Season

By | December 21, 2021

How to maximize your tax refund for this upcoming tax season?. So we’re going to be covering a range of topics from stimulus checks to child tax credit payments unemployment stocks cryptos retirement plans general tax deductions etc.

We’re going, to begin with, the child tax credit payments, so many Americans did not receive the full amounts or they didn’t receive a payment at all when they were supposed to. So please make sure that you claim all that money on your tax return. All the money that you were short-changed that’s your money and in so many cases the government did a lousy job of distributing those funds out properly in January of 2022. You’re going to receive an IRS letter called the 6419. This is going to report to you the total amount of child tax credit payments that you received in 2021. Keep this letter for your records.

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How to maximize your tax refund for this upcoming tax season?

How to maximize your tax refund for this upcoming tax season?. You’re going to use that letter to recoup all the money that you were supposed to. Get and did not get on your tax return if you were shortchanged and you normally don’t file a tax return because you’re not required to. Then you’re going to need to file a tax return and make sure that the 6419 letter is correct. So I’ve seen so many times where the IRS where they report to you bad or inaccurate information. So if you think that the payment amounts listed on your 6419 letters are not accurate. Match it up to your bank statements or your records. If there are discrepancies you’re going to need to resolve them.

You’re going to go through a similar procedure if you didn’t receive the full amount that you’re entitled to. Then you’re going to claim what you were shorted on your tax return. You’re going to receive an IRS letter 6475 in January of 2022. Save this letter for your records. You’re going to need it for your tax return. The IRS letter 6475 that’s going to confirm the amount you received and it’s the same situation if you normally don’t file a tax return because you’re not required to. You’re going to need to file your taxes to recoup what you were shorted and again. Especially if you have multiple dependents please double-check that what you received matches. What the IRS letter 6475 says you received don’t let the IRS shortchange you again.

If you’re in the stock market

If you’re in the stock market or the cryptocurrency market you need to know three things. First, if you’re single and your taxable income is under forty thousand four hundred dollars a year or if you’re married filing jointly and your combined taxable income is under eighty thousand eight hundred dollars a year. There’s a zero percent long-term capital gains tax rate which means that you pay zero federal income taxes. If you hold a stock or crypto for a year or less. It’s a short-term capital gain if you hold a stock or crypto for more than a year. It’s a long-term capital gain if you have long-term capital gains and your income is below those thresholds. It’s subject to the zero percent long-term capital gains rate which means that it’s non-taxable.

How to maximize your tax refund for this upcoming tax season? So let me give you an example, let’s say that you’re up to ten thousand dollars on a stock and you haven’t sold it yet. If you’re single and you make thirty thousand dollars a year. You can sell the stock and you’ll pay zero dollars in federal taxes. If it’s a long-term capital gain so you might want to consider selling some long-term capital gains. Before the end of the year, have your gains tax-free because if you go over the income thresholds next year and then you sell it. Then you’re gonna end up paying taxes on it.

The second thing that you should know

The second thing that you should know is that for stocks and cryptos you can do tax-loss harvesting. This is when you sell you’re losing stock or crypto so that you can claim a tax deduction on the loss. However, if you sell a stock and you rebuy it within 30 days. You’re not going to be able to claim a tax deduction because of the wash sale rule. So if you sell stock on December 31st for a loss and re-buy it in January within 30 days. You cannot claim a tax deduction. The brokerage accounts issue your tax form the 1099-b by February 15th. So they’re going to be considering this on your tax form.

Third, the wash sale rule does not apply to cryptocurrencies for the tax year of 2021. This is most likely going to change in 2022 and onwards but currently, it’s not applicable. So take advantage of this. While you still have the opportunity and just so you know. If you’re going to be making charitable donations please do so by December 31st to claim that as a tax deduction. If you don’t itemize your deductions and you’re just claiming the standard deduction. You can deduct monetary charitable contributions up to three hundred dollars if you’re single and up to six hundred dollars if you’re married. file jointly if you’re going to be making donations.

How to maximize your tax refund for this upcoming tax season?

How to maximize your tax refund for this upcoming tax season?. Anyways please do so by the end of the year to claim that as a tax write-off. When it comes to medical expenses you can claim those as tax deductions. If your out-of-pocket expenses exceed 7.5 percent of your income for example if your income is one hundred thousand dollars you can deduct medical expenses. If they are more than seven thousand five hundred dollars in total which is seven point five percent of your income. So I want people to know that one out of five eligible taxpayers does not claim the earned income tax credit.

This is a tax credit for lower-income individuals and families. If you’re single with no children you qualify. if you make under twenty-one thousand four hundred thirty dollars a year. If you’re married with children you can qualify if your income is under fifty-seven thousand four hundred fourteen dollars a year. The qualifying income threshold that’s gonna depends on how many children you have and your filing status of the credit.

It can be up to thousands of dollars

It can be up to thousands of dollars for retirees’ required minimum distributions or rmds have been reinstated for 2021. They were suspended last year in 2020. Check on your rmd situation because it’s now different based on your age and which retirement plan that you’re dealing with failure. To take out your rmd will result in penalties that can be up to 50 percent for unemployment benefits in 2020. The first 10 200 were tax-free in 2021 that is no longer the case. If you received unemployment benefits in 2021 and did not have taxes taken out or you didn’t have enough taken outs. Prepare for that to eat into your refunds or potentially you owing money to the IRS So just keep that in mind and be prepared.

How to maximize your tax refund for this upcoming tax season? If you want to fund your traditional ira retirement plan and potentially get a tax deduction. You will have until April 15th of 2022 to make your contribution and claim the tax deduction on your 2021. Taxes just as a reminder because of the secure act you can contribute to your traditional ira regardless of your age as long as you’re still working. So please do so by April 15th if you want to fund your 401k to reduce your taxable income. You’re going to have to get that completed in the calendar year so you’re going to have to do that by December 31st. And if you can’t file your taxes on time please file an extension by April 15th of 2022. To avoid the failure to file a penalty which could be very substantial.

 

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