Don't Mess With Taxes

Getting your tax ducks in a row takes on a different meaning in November. But whatever bird you choose for the metaphor, make some time this month to complete tasks that will prevent tax turkeys. (Photo by Mohan Nannapaneni)

November, the eleventh and penultimate month of the year, is like everything else in life. As a deadline nears, the end of 2022 in this case, the number of tasks to tackle grows. A lot.

During these next 30 days we have holidays, both official like Thanksgiving and Veterans Day, and unofficial like National Doughnut Appreciation Day on 11/5, and which I thought was every day!

Most of us also have to get ourselves and our abodes ready for winter's coming cooler temperatures.

And, of course, there are elections. The poll results, from local to state to federal, could affect many parts of our lives, including taxes.

But before our newly- or re-elected public officials take office and make changes, here are five existing tax moves to make this November.

1. Don't miss November's Tax Days. No, I'm not suffering from a Halloween candy hangover. There are a couple of deadlines for taxpayers in special dealing with special circumstances.

The first is Nov. 15. That's the due date for filers who earlier this year endured major disasters.

Nov. 15 is Tax Day for —

• Arizona taxpayers, specifically members of the Tribal Nation of the Salt River Pima Maricopa Indian Community, who were hit by severe storms;
• Missouri taxpayers where severe storms created flooding;
• Kentucky taxpayers who were in the same path of severe, flood-producing storms as their Missouri neighbors; and
• St. Croix, U.S. Virgin Islands, taxpayers who encountered a water shortage from unprecedented sargassum seagrass influx.

Then there are individuals who didn't file a return because they didn't have to, but who missed out on various COVID relief payments. Around 9 million potential tax break recipients should have received letters from the Internal Revenue Service encouraging them to file by Nov. 17.

To make those claims easier, the IRS is keeping Free File operating through Nov. 17. These eligible nonfilers can submit a Form 1040 electronically and, as the name says, at no cost.

Those who make much less than the Free File income cap — either less than $12,500 as a single taxpayer or less than $25,000 as a married couple filing jointly — and who prefer an easier claim option can use GetCTC.org's online option. The GetCTC simplified filing tool is available to eligible nonfilers through Nov. 15.

2. Consider converting to a Roth IRA. The stock market has been, putting it nicely, crazy this year. While some weeks, even months, have been positive, we're still in an overall bear market. The tech-heavy Nasdaq has taken the biggest hit, dropping around 30 percent so far in 2022. The Dow Jones Industrial Average lost more than 20 percent. The one silver lining here is that the declines could make converting your traditional IRA to a Roth worthwhile.

When you convert, you'll owe tax on the traditional retirement account's tax-deferred dollars that you move to a Roth. But by doing so when the value of your traditional IRA is lower, you'll face a smaller conversion tax bill. You can read more about this option in my post on how a down market could make it a good time to convert a traditional IRA to a Roth.

3. Review your full portfolio. If your retirement funds are down, it's likely your taxable equity assets have taken a hit, too. But some long-term holdings could be worth more than when you bought. If that's the case, it could be to cash in some of your long-term holdings. The capital gains tax on these sold assets generally is lower than your ordinary tax rate.

If, however, your holdings were hard hit, they still could provide some tax benefits. As part of your overall asset analysis, you might decide to sell some of those losing assets. This stock loss harvesting can offset any gains you made on other holdings.

4. Feather your nest eggs. No, that's not a bad pun about this month's favorite fowl. It's a reminder to give to yourself, especially your future, older self an early holiday gift. If you haven't already maxed out your 2022 retirement account contributions, add more now.

Yes, you do have until next April's Tax Day to make IRA contributions, either traditional or Roth, for this year. But the sooner you get your money into the account, the sooner it has the potential to start to grow tax-deferred or tax-free. And if your traditional IRA is deductible, a maximum contribution could help reduce your taxable income when you file.

When it comes to workplace retirement plans, Dec. 31 is the last day you can put money for the current tax year into your 401(k) or similar plan. Get to your benefits office ASAP to bump up your contributions for the final few pay periods of 2022. This post on inflation adjustments for retirement plans has more on how much you can put into your nest eggs in 2022 and, if you've already maxed out, in 2023.

5. Fine tune your Form W-4. By now, you should have a good idea of what your final 2022 earnings will be. If it looks like you might be getting a refund when you file next year, consider adjusting your withholding now. That way, for the final pay periods of 2022, you'll get more of your hard-earned money in your pay rather than some of it being held for months by Uncle Sam.

If turns out instead that you'll owe the U.S. Treasury, you need to have more withheld. That will help ensure you don't have to come up with a big payment when you file your taxes next year. And by making the change this month, the added tax withholding will be spread over several paychecks, lessening the payday tax bite.

Either way, use the IRS' withholding calculator to help you have the correct amount of tax taken from your remaining 2021 pay.

More November tax moves: Yes, this a lot to think about in an already busy month. But taking care of tax tasks now could help you cut your 2022 tax bill. So try to make some time for tax moves that fit your situation this month.

And if you're industrious and want some more tax topics to think about, check out the ol' blog's right column for a few more November Tax Moves. They're under the so-named heading, just below the countdown clock ticking off the time left here in tax year 2022.

Once all this tax stuff is done, you still have time to work on your Turkey Day spread and get in some early holiday shopping and celebration planning. And you'll be able to do all that without that nagging year-end tax voice in your head.

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