Tax Planning Guide for Individuals

Tax Season Schedule - For Individuals *

• 11/16/23

  • Postponed deadline for most CA residents. Most individuals and businesses in California will now have until Nov. 16 to file their 2022 returns and pay any tax due.

    • Eligible returns and payments include:

      2022 individual income tax returns and payments normally due on April 18.

      For eligible taxpayers, 2022 contributions to IRAs and health savings accounts.

      Quarterly estimated tax payments normally due on April 18, June 15 and Sept. 15.

      Calendar-year 2022 partnership and S corporation returns normally due on March 15.

      Calendar-year 2022 corporate and fiduciary income tax returns and payments normally due on April 18.

      Quarterly payroll and excise tax returns normally due on May 1, July 31 and Oct. 31.

      Calendar-year 2022 returns filed by tax-exempt organizations normally due on May 15.

• 11/20/23 - 11/24/23

  • RTC offices will be closed for Thanksgiving.

• 12/22/23 – 1/2/24

  • RTC offices will be closed for the holidays.

• 1/15/24

  • Q4 Estimated taxes are due. This is an opportunity to project your tax liability and make the necessary payments to avoid underpayment penalties.

• 1/31/24

  • If you are a current client RTC, or have expressed an intention to work with us, will contact you and provide engagement letters, organizers/questionnaires, and tax document checklists

  • Primary tax documents should be delivered to individuals from employers and financial institutions.

• 2/23/24

  • All tax documents, engagement letters, and organizers/questionnaires to be provided to RTC for preparation of the individual tax returns.

• 3/1/24 - 3/30/24

  • Tax meetings will be scheduled between RTC and clients to review the draft returns. Please note this is not a meeting to provide tax documents, but a meeting to review the draft return, discuss opportunities to reduce tax liability in the future, and finalize the tax return.

• 4/15/24

  • Tax filing deadline. RTC makes a concerted effort not to extend unless there are extraordinary circumstances. If additional documents, outside of the tax payers control, that have not been received by this time, RTC expects that all other tax documentation has been received and a draft return prepared prior to filing an extension.

*** RTC strictly adheres to the above schedule ***

Prior to the end of the tax year (Before 12/31)

Filing Status and Major Life Events

It’s important to correctly identify your filing status, as not doing so can result in missing out on tax return deductions. So, whether you are single, married filing jointly, married filing separately, head of household, or a qualifying widow(er) with a dependent child, make sure you know the distinction and be ready to communicate any changes in filing status.

If you’ve, like many others, experienced major life changes this year, these could also be relevant to your filing status. Significant life events that are tax-relevant include marriages, divorces, childbirth, new disabilities, loss of a family member, or living through a disaster situation. More information about what to do in these situations can be found here.

Check your WithholdingS

If you receive a W2 from an employer the best thing you can do is to check your tax withheld from your paycheck. I suggest all of my clients confirm their taxes withheld will cover the tax liability they will have at the end of the year. You can do a high level check by comparing your effective tax rate from you prior year tax return to your current withholding percentage.

The effective tax rate for individuals is the average rate at which their earned income, such as wages, and unearned income, such as stock dividends, are taxed. You can get this from your tax preparer or tax software.

To get your current withholding percentage, you add up the salary (gross wages) amount on each of your latest paystubs. Then add up the federal income tax withheld YTD. The ratio of withholdings to salary (gross wages) is your withholding tax rate. If they are equal or close you are probably withholding at the right rate.

A more robust check would be to use the IRS Tax Withholding Estimator.

Note, due to COVID 19, millions of individuals have been collecting unemployment, far more than is typical. These unemployment payments ARE taxable and those who collected it without opting to set money aside to help pay for that in advance will see significant increases in how much they owe in taxes.

Estimated Taxes

If you are in business for yourself, you generally need to make estimated tax payments. Individuals, including sole proprietors, partners, and S corporation shareholders, generally must make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.

Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.

Individuals, including sole proprietors, partners, and S corporation shareholders, generally use Form 1040-ES (PDF), to figure estimated tax. If you need to make estimated tax payments, your tax preparer should be able to provide you with the amount you should pay and by when to avoid penalties.

If you'd like to read the full details, please visit: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

Retirement Plans

If you haven’t already maxed out your contributions to your retirement accounts, consider doing so before the end of the year. Contributions to these accounts can often be deducted from your taxable income. In general, contributions to a retirement plan need to be made within the tax year, but there are some contributions that aren’t required until the time of filing. Be aware of the type of retirement plan and the unique contribution deadlines.

Contributions to your companies 401k plan are the most common, but there are other options especially for self-employed individuals. Here some highlights of the most common retirement plan options:

• Simplified Employee Pension (SEP): Contributions an employer can make to an employee's SEP-IRA cannot exceed the lesser of:

  • 25% of the employee's compensation, or

  • $66,000 for 2023 ($61,000 for 2022, $58,000 for 2021 and $57,000 for 2020)

  • More details on Simplified Employee Pensions here

• 401(k) plan: The limit on employee elective deferrals (for traditional and safe harbor plans) is:

  • $22,500 in 2023 ($20,500 in 2022, $19,500 in 2021 and 2020; and $19,000 in 2019), subject to cost-of-living adjustments

  • More details on 401k plans here

• Savings Incentive Match Plan for Employees (SIMPLE IRA Plan): A SIMPLE IRA plan (Savings Incentive Match PLan for Employees) allows employees and employers to contribute to traditional IRAs set up for employees. It is ideally suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.

  • More details on SIMPLE IRA plans here

Charitable Contributions

Charitable Donations made to qualifying organizations, as described in Schedule 170 of the Internal Revenue Code, throughout the tax year can be counted when itemizing deductions in Schedule A. 2023 deduction limits for gifts to public charities, including donor-advised funds, are 30% of adjusted gross income (AGI) for contributions of non-cash assets, if the assets were held more than one year, and 60% of AGI for contributions of cash. Contribution amounts in excess of these deduction limits may be carried over up to five subsequent tax years.

Note that you can no longer claim the deduction for cash donations up to $300 ($600 married filing jointly) if you claim the standard deduction.

There are a few main strategies to know as a donor seeking to maximize impact through charitable contributions with their current assets in 2022. For those who itemize deductions, giving capital assets such as stock, cryptocurrency, real estate, or business interest to a donor advised fund may maximize your generosity and minimize taxes. Beyond claiming a deduction for the fair market value of an asset, donors can avoid the capital gains tax they would otherwise incur if they sold the asset and then donated the cash proceeds. This can mean even more going to charity and less to taxes.

Sell Losing Investments

Selling losing investments, also known as tax-loss harvesting, can help reduce your taxable income. When you sell an investment at a loss, that loss can be used to offset capital gains from other investments, effectively reducing the amount of tax you owe. It’s a strategic move to minimize your tax liability. However, it’s important to consider the potential for future growth of the investment before selling.

Premium Tax Credit

Buyer Beware: The Premium Tax Credit can get tax payers in trouble if they received a benefit from the Health Insurance Marketplace, but earned more than expected. The premium tax credit – also known as PTC – is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace.

The complication is that it is an advance credit meaning you are getting the benefits of the credit all year BEFORE you file your tax return based on the income you expected to report in this tax year. If your income increases above the threshold to qualify you must pay the credit back as part of your tax liability.

To get this credit, you must meet certain requirements and file a tax return with Form 8962, Premium Tax Credit. To be eligible for the premium tax credit, your household income must be at least 100 – but no more than 400 – percent of the federal poverty line for your family size, although there are two exceptions for individuals with household income below 100 percent of the applicable federal poverty line. For example the federal poverty line for a married couple with 3 kids is $30,170. Thus if you made more than $120k you likely have to pay back the advance credit.