In 2022, less than six weeks remain. You have approximately 40 days to host Thanksgiving, shop for gifts, prepare for holiday meetings, and complete year-end tax arrangements. The clock is ticking!
Tax deadlines at the end of the year
There are a number of tax-related end-of-year tasks for individuals. By completing these tasks sooner rather than later, you can ensure that your donation, gift or distribution doesn’t end up in a mad end-of-year mess!
- 529 contributions (and refunds) – To be eligible for a state tax credit or deduction for tax year 2022, contributions must be made by December 31, 529; in this regard, reimbursements of 529 for qualifying educational expenses incurred in 2022 must also be made by December 31.
- Charity donations – Financial donations to charity must be completed by December 31 to be deductible on tax returns for 2022; Checks must be postmarked by December 31st and gifts of stocks, bonds, or mutual funds must be received by December 31st.
- Required Minimum Distributions – For persons aged 72 and over, the required minimum distributions (RMDs) must be made from retirement accounts by December 31; however, those who turned 72 in 2022 have until April 3, 2023 to take their first RMD.
- Qualified Charitable Distributions – For individuals aged 70.5 and over, qualifying charitable distributions (QCDs) must be paid from retirement accounts by December 31.
- Roth conversions – When converting traditional IRA or pre-tax 401(k)/403(b) funds to a Roth IRA, the conversion must be completed by December 31st.
- Contributions to employer-financed pension plans – Employee contributions to 401(k)s, 403(b)s and deferred compensation plans for the 2022 tax year must be completed by December 31.
- Solo 401k setup – In order for a self-employed individual to make a Solo 401(k) for 2022, the Solo 401(k) must be established on or before December 31.
Controlling “To Dos” that can wait
Are there any important tax deadlines for 2022 that are after December 31? Luckily, there are a handful of promotions that fall after the always-busy holiday season.
- Q4 estimated tax payments – The final estimated tax payment for 2022 is due on January 16, 2023.
- Retirement Account and HSA Contributions – Contributions to IRAs, Roth IRAs, Health Savings Accounts (HSA) and most stand-alone pension plans for tax year 2022 are not required to be made before the April 2023 tax return deadline; if an extension of the tax return is filed, even more time is gained to contribute (until October 2023).
- Retirement account recharacterizations – If you have contributed to a Roth IRA but are not eligible to contribute based on your income, the contribution may be reclassified as an IRA contribution; The transfer must be completed by the filing date of your tax return.
- Retirement Account Excess Contributions – Contributions to IRAs, Roth IRAs and HSAs may not exceed IRS contribution limits. Excess contributions must be paid by the tax return deadline for the year in which the contribution was made.
A word on premium increases in 2023
If you are auto-contributing to one of these accounts to maximize your contribution, consider the following contribution increases in 2023:
- HSA – $3,850 for self insurance and $7,750 for family insurance; People 55 and older can contribute an additional $1,000.
- 401(k) / 403(b) – $22,500; People 50 and older can contribute an additional $7,500.
- IRA/Roth IRA – $6,500; People 50 and older can contribute an additional $1,000.
- Simple IRA – $15,500; People 50 and older can contribute an additional $3,500.
- Indiana 529 State Tax Credit – Indiana taxpayer contributions qualify for a 20% tax credit with a new maximum credit of $1,500 for a $7,500 contribution.
By getting time-sensitive tax work done sooner rather than later, you can focus the holiday season on what really matters – spending time with family and friends. Of course, certain deadlines fall after the holidays, but make sure you adjust auto-contributions to accounts you want to maximize in 2023!
Abby Van Der Heyden, CFP, is a financial consultant with Bedel Financial Consulting, Inc., an Indianapolis-based financial management firm. For more information, visit their website at www.bedelfinancial.com or email Abby at [email protected].