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Are you Prepared for Tax Day?

The countdown to Tax Day has begun. Here are some steps you can take as the deadline approaches.

Many Americans dislike paying taxes, but they are unavoidable. That's what Ben Franklin said over 200 years ago: "Nothing is certain except death and taxes". Taxes are here to stay. The earlier you begin, the more ready you'll be.

Before the federal tax deadline of April 18, you may find Ramos Capital Group's 2022 Federal Income Tax Tables useful. And if you haven't filed yet, here are some tax season tips:

Get Your Paperwork Organized

Filing taxes can require a lot of paperwork. Make sure you have all your essential documents ready before you start, so you can prevent errors and claim every deduction you deserve. Documents and information you may need to include are:

  • Forms W-2, Forms 1099 and other tax forms showing income earned

  • Records of charitable contributions

  • Previous-year tax returns

  • Records of mortgage interest and property taxes paid

  • Any childcare expenses or medical costs


Work with your tax professional to help you determine the specific documents you’ll need to complete your taxes. 

Max Out Tax-Advantaged Accounts Before Tax Day

You can still lower your taxable income for 2022 by contributing to some accounts before Tax Day 2023. For example, you have until April 18, 2023 to put money in an IRA or an HSA for 2022. You can contribute up to the IRS limits for 2022, which are:

  • $6,000, plus $1,000 in catch-up contributions if you’re 50 or older at any time during the 2022 calendar year, for IRAs3

  • $3,650 for single coverage ($7,300 for family coverage) under a high deductible health plan, and another $1,000 if you’re 55 or older at any time during the 2022 calendar year, for HSAs

What about your 401(k) plan from your employer? You can't contribute more for 2022, but you can for 2023. The limit is $22,500, plus $7,500 extra if you're 50 or older in 2023. Think about saving more now. It can lower your taxable income for 2023 and grow your retirement fund.

Note, remember that there may be other limits and rules that affect how much you can put into an IRA, HSA or 401(k) plan. These may be lower than the IRS maximums shown above. You should talk to a tax expert for more details on the contribution rules. 

Consider Getting Help From a Tax Professional

Almost half of the tax returns filed online for the 2021 tax year were done by individual taxpayers themselves. These people may know how to deal with complicated tax forms and have the time to collect documents and prepare their own returns. They may also have a simple tax situation, which can make the process easier.

Others people get professional help. If your finances are complicated, you might want to work with a tax expert. A tax expert can help you:

  • Gather the right tax and financial data from your investment accounts

  • Take advantage of any deductions or credits you’re entitled to

  • Prepare your income tax returns

  • Provide advice tailored to your unique financial situation

A tax expert can help you with income tax estimates, such as quarterly payments, and lower the chance of unpleasant surprises if your tax situation changes.

. Further, if you have complex tax planning needs, your Ramos Capital Group Financial Advisor can connect you to experienced tax professionals  to help ensure your tax strategy is optimized.  

Plan for Future Tax Seasons

You can still use tax-efficient strategies to improve your long-term financial plan. Active tax management throughout the year can help you save more for your goals and keep more of your earnings. For example:

  • Tax-loss harvesting: This is when you sell some stocks or securities at a loss to offset your capital gains taxes. You can even use some losses from previous years.

  • Tax-aware asset location: This is when you put higher-yield assets in a tax-deferred or tax-exempt account, which may lower your taxable income and may boost your after-tax returns.

  • Tax-favorable investment options: These are investments that are not subject to federal taxes, and sometimes state and local taxes too. For example, municipal bonds, exchan

  • ge-traded funds or separately managed accounts.

With Ramos Capital Group your Financial Advisor has access to a range of tax-smart techniques to help you manage your tax liability and grow your long-term wealth, 365 days a year. Speak with your Ramos Capital Group Financial Advisor about how you can incorporate tax-efficient investment strategies into your financial plan today to help you prepare for tomorrow. 

If You Owe Money, Consider How You'll Pay

 instead of a refund, you end up owing the IRS money, you’ll want to have a plan. If you have the cash and don’t want to risk draining your savings or emergency funds, writing a check may be the easiest option.

But if you have a steep tax bill, you may want to look for additional sources of liquidity. One approach is selling individual securities or funds in your portfolio to help raise the cash you need. Be aware of the downsides, including potential income taxes on capital gains, loss of future growth potential and asset-allocation imbalances in your portfolio. Your Ramos Capital Group Financial Advisor can help you mitigate these downsides and potentially reduce the taxes you may owe, 

Other options include using a credit card, taking out a loan or paying the IRS in installments. Each option has its own advantages and disadvantages. Plan ahead and choose the best option for you.

Think About How You’ll Spend a Refund

If you’re among the three-quarters of tax filers who typically receive a refund, you may be looking forward to another one in 2023. Instead of spending it all outright, you may want to consider how to use it to support your long-term financial well-being, for example by:

  • Reducing your debt burden:  Paying off high-interest debt, such as credit cards or payday loans.

  • Preparing for the unexpected:  Saving for an emergency fund that can cover at least three to six months of living expenses.

  • Adding to your nest egg: Investing in a retirement account, such as a 401(k) or an IRA, and taking advantage of any employer match.

  • Contributing to a college savings plan, such as a 529 plan or an ESA, for yourself or your children.

  • Donating to a charitable cause that aligns with your values and goals.

Tax planning is not just for April. By taking some simple steps now and throughout the year, you can reduce your tax burden and avoid stress. 

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