Tax Resolutions for 2022

Tax Resolutions for 2022 post image

2021 is almost over — a dank, foul, depressing funhouse mirror of 2020 — and for most of us, it can’t end too soon. COVID is still here, taunting us with new mutations every time we finally think we’ve turned the corner. Americans still hate each other as much as ever. The “Real Housewives” still burgle our dignity with each episode that airs. NFL teams have turned into quarantine clinics, and Tom Brady is still winning games. Is it any wonder so many people have started rooting for a comet to hit the planet and wipe out anything larger than the rodents?

January 1 is when we traditionally resolve to make our lives a little better. Amateurs join a gym, stop going by Groundhog Day, and forget to turn off autopay on their membership until August. (More experienced weight loss wannabes go online and stop those payments sooner.) Others decide to finally quit smoking for good this time or drink less. The really ambitious ones look beyond those goals to learn a new hobby, get organized, or put their spending on a diet.

A side benefit of forming new habits is that many of the most popular resolutions come with built-in tax advantages. Your gym membership may be deductible if your doctor prescribes it for treating a specific medical condition. IR 1999-55 holds that your stop-smoking programs are a deductible medical expense. (You can also claim tax-free reimbursement from your flex-spending or health savings account.) And if giving up booze will last longer than “Drynuary,” the cost of rehab is also deductible.

But we’re going to propose another resolution to save you even more. You won’t have to worry about it every day, and you won’t have to give up anything you’ll miss (even if it’s not healthy for you in the long run). Nope, we’re not going to guilt you into giving up that $5 latte that jumpstarts your morning. Our modest proposal is that you resolve to pay attention to taxes before you show up in our office come tax time.

Most Americans think of taxes as something they worry about once a year, on April 15. And for some, with simple situations, there’s really not much more to it. If your 1040 is limited to a couple of W-2s and a mortgage interest statement, you may not be able to do much more than making sure your withholding is enough to cover your bill. That last thing you want is a surprise tax bill, especially when it’s easy to avoid.

But if you’re investing a securities portfolio, taxes matter every time you trade. If you’re saving for retirement, taxes matter with every contribution. If you’re managing rental property, taxes matter with every improvement. If you’re running a business of any sort, managing your taxes should be just as important as finding the right credit card processor. It’s a year-round responsibility. If you’re paying too much, it costs you in every paycheck (where your withholding could have been less) and every quarterly estimate (where the check could have been smaller).

So this year, be better. Don’t make any portfolio moves without calling us. Don’t buy or sell any business equipment without checking first. Don’t show up in March with a stack of surprise settlement statements or 1099s. This might sound like overkill. Sometimes it might even be overkill. But it beats what we in the business call an “April 15 surprise.”

Do you know how it feels to get an April 15 surprise? It’s not great. It’s like something out of a Scandinavian horror movie. Resolve to keep us informed in 2022, and let us help make your whole year better!

Roland C. Manuel, Enrolled Agent