I remember reaching the end of 2020 … it seemed as if all of us were breathing a huge collective sigh of relief.
And then … more chaos.
Is it wrong to hope that 2022 will turn out better? Hard to say … but I do know that what I DON’T want to do is retreat into bitter cynicism. That’s hard to avoid sometimes (especially in a tax and accounting practice — dealing with the IRS can breed massive cynicism).
But I am choosing to wrap up this year with hope on the horizon. I hope you’ll join me in that.
This is also a HUGE week for our profession. Because if you want to make ANY 2021 moves (outside of IRA things, which can be retroactively applied after 12/31) … well, we’re running out of time.
I hope that by the time you read this, you’ve already made the tax moves you need to make.
But if you want to talk, we’re here:
I would ask you to have patience with us. Because of the volume of client requests this time of year (on top of family and holiday-related disruptions), we’re not always able to respond as quickly as you might need.
In which case, I’m going to take the quick opportunity in my last Note of 2021 (!) to recap your possible year-end moves…
Emelia Mensa CPA on Last-Minute Tax Moves for 2021
“Every task, goal, race, and year comes to an end…therefore, make it a habit to FINISH STRONG.” – Gary Ryan Blair
Because time is short, and some tax moves do require more than this week to pull off, I’m restricting myself to those items which you can realistically handle before the end of the year (Friday).
This will be short, and (hopefully) sweet to your wallet…
1) Use Your FSA Funds
Money set aside in a flexible spending account must be spent by the end of the year, else the funds are lost. Some employers allow a 2-and-a-half month grace period. So, check with your employer to see what your personal deadline is for utilizing your FSA savings.
2) Make an Extra Payment on Your Mortgage
If you own a house with a mortgage, and you can swing the cash flow hit, add an additional payment before year-end, and the interest on that payment will be deductible for 2021. Of course, that means that it WON’T be so for 2022, but perhaps you can use this as an “extra” payment … and get ahead of the escrow game.
You know how I feel about charitable giving by now (I hope). This week, of course, is a big one for non-profits (including local charities) who are the happy beneficiaries of our last-minute donations. And with the $300 deduction available even for those who take the “standard deduction” ($600 for couples), your money goes even further. Please, if you can, give.
You can pay early on a monthly gift or give a lump-sum gift. The purpose (aside from the many, many benefits to the organization, and to you, of course), being to knock more income into a different tax bracket perhaps, or to simply cut your tax bill, regardless of the bracket status.
Now, there are plenty of others. But these are the quickest and the easiest.
- Max out personal gifts — if you have means, you can give up to $15K tax-free to a family member or friend.
- Max out workplace retirement accounts (if you have one).
- Evaluate (quickly) what your income might look like in 2022, and try to accelerate or decelerate any kind of income (that you can control) accordingly.
Hope this helps!
More (much more, especially about any 2022 tax changes) in the future … which starts next week.
Emelia Mensa EA, CPA