Happy New Year from the Internal Revenue Service. While there may have been limited activity at your workplace last week, the IRS was busy.
The result?
You need to watch your mailbox for IRS letters and check your contribution % on your 401(k) and Simple IRA.
The IRS announced that it will start sending out information letters to recipients of the advance Child Tax Credit and of the third round of Economic Impact Payments that were made in January.
Child Tax Credit (CTC)
Taxpayers will be required to reconcile any advanced CTC received and the payments with their 2021 tax returns, which are currently expected to be due April 18, 2022.
IRS Letter 6419 for advanced CTC recipients will include the total amount of credits that the taxpayer received. The credits were sent out monthly starting last June 15 and were calculated based on information from taxpayers’ previous returns, so the taxpayer have received too much – or too little.
If you received too much, you would need to repay it; if they received too little or were due the credit but didn’t receive it at all, they can claim the full amount on their 2021 tax return.
The advanced CTC letters will start going out this month and continue into January 2022.
3rd Economic Income Payments
In late January, the IRS will start sending out Letter 6475, “Your Third Economic Impact Payment,” to EIP recipients. That third round, which was sent out starting in March of this year, were advanced payments of the 2021 Recovery Rebate Credit. Like the advanced CTC payments, they were based on information from previous returns, and so will need to be reconciled with the taxpayer’s 2021 tax return.
Retirement Contributions
Make sure you log onto your payroll or 401(k) provider and change your 2022 contribution to maximize your retirement and tax savings.
401(K)
Retirement savers with a 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan can contribute up to $20,500 in 2022, a $1,000 increase from the $19,500 limit in 2021. This means you can set aside about an extra $83 per month into your 401(k)-plan beginning in 2022.
401(k) savers ages 50 and older can make an annual catch-up contribution up to $6,500 in 2022 (no change from 2021), for a total contribution of $27,000.
SIMPLE IRA
For 2022, the annual contribution limit for SIMPLE IRAs is $14,000, up from $13,500 in 2021. Workers age 50 or older can make additional catch-up contributions of $3,000, for a total of $17,000.
IRA and ROTH IRA
The maximum amount you can contribute to a Traditional IRA and a ROTH IRA for 2022 is $6,000 if you’re younger than age 50. Workers aged 50 and older can add an extra $1,000 per year as a “catch-up” contribution, bringing the maximum IRA contribution to $7,000. You must have earnings from work to contribute to an IRA, and you can’t put more into the account than you earned
Wishing you and your family a Happy New Year
The Tannery Team
Michael, Tina, Jill, Jennifer, Brad, Ashley, Ben
Call us at214-239-4700 or click to set up a ZOOM MEETING
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The opinions expressed in this material are for general informational purposes only and are not a substitute for professional advice. Individual circumstances do vary.
