Upcoming Tax Deadline and IRA Contributions
The April 18 tax deadline approaches, prompting CPA Gene Marks, president of The Marks Group, to share strategies for optimizing individual and small business tax returns. Taxpayers generally have until Tuesday, April 18, to file returns or request extensions, as April 15 falls on a Saturday and April 17 is Emancipation Day in Washington, D.C., where the IRS is headquartered. For those with an IRA, contributions for 2022 can still be made until April 18, amounting to approximately $6,000.
The big thing I want to get across... Roth IRAs and Roth 401(k)s – that is where you can make an after-tax contribution, and then it will grow tax-free, and you can take it out tax-free.
Leveraging Roth Accounts in a Down Market
Marks emphasizes Roth IRAs and Roth 401(k)s for their tax advantages, particularly with the stock market down about 15% from highs. Clients are contributing now to capture growth tax-free upon market recovery, providing a smart way to save on taxes as investments appreciate.
Wash Sale Strategy for Stock Losses
Another key tip involves the wash sale rule to capitalize on stock losses prevalent in current markets. Sell a losing stock to offset capital gains or up to $3,000 against ordinary income, then wait 30 days before repurchasing the same or substantially identical stock. This approach allows taxpayers to realize tax benefits while maintaining their position, assuming minimal price movement over the period.
You have a stock. Maybe you’ve lost money on the stock, which is not unusual right now. So you can sell that stock, and if you have a loss on it, you can offset it against any capital gains, and, you can even take $3,000 of that loss and offset it against your regular ordinary income. If you just hold back for 30 days, you can buy that stock back again.
Small Business Strategies: 401(k) Matches and Bonus Depreciation
Small business owners should maximize 401(k) employer matches when filing corporate taxes, especially amid tight labor markets. These contributions aid employee retention and attraction while qualifying as tax deductions, with deadlines aligning to the 2022 tax filing date. Additionally, bonus depreciation rules are changing: previously 100% deductible for qualifying capital items like computers or equipment placed in service, it reduces to 80% for 2023 purchases and further to 60% next year. Businesses can secure larger deductions by purchasing equipment promptly.
Particularly in these times of tight labor, the more you match for your employees’ 401(k), the better it is for retaining employees and even attracting new employees. I’d rather give that money to my employees than give it to the government because it’s a tax deduction.
We’ve trained thousands of new employees to answer phones and help people. While much work remains after several difficult years, we expect people to experience improvements this tax season.
