We all know that our circumstances often change from year to year. But no one wants to get caught by surprise with a tax increase. There are a handful of common scenarios that can trigger a bump in what you may owe. So before you file, make sure you’re informed. You may need to be on-guard and prepare to pay more. Just review this list to make sure you’ll be all set!
Know the New Tax Laws
You obviously want your local CPA and tax preparer to keep you updated on any tax law changes. Along the way, though, it helps to do a little homework on your own. Multiple bills passed in the recent years could alter what you’ve accounted for on your tax returns in the previous years.
While the assistance paid out by government programs were designed to reduce taxes owed, some changes to the law might affect you in unexpected ways. For example, you may have received unemployment benefits that are now taxable. There was also an adjustment for retirees to take their required minimum distributions again in 2021.
Another scenario is for small businesses that took out a loan—that will need to be accounted for on your business tax return. The same goes for other grant benefits your organization may have been awarded. What’s more, if you received an advance child tax credit, that payment will affect this year’s tax return too.
Some people may also have been issued a duplicate economic stimulus check. You’ll want to check those numbers to confirm that you won’t end up with any errors on your tax return.
Other Common Tax Increase Scenarios
Although the tax reporting requirements had some unique adjustments recently, there are still other life events that many people tend to forget about.
Individuals who are recently retired and have begun collecting their Social Security Benefits may be in for a surprise if they also made the decision to return to work part-time. Your additional earnings could end up making your Social Security benefits taxable, which would then result in a reduction in your overall benefits for the year.
A few other situations and life events can easily get overlooked, as well. Think of whether you had any capital gain statements. If your mutual funds sold assets, that taxable event may not have been something you planned for. That’s why it pays to have a comprehensive tax planning review before you file!
Let’s Get Your Tax Planning in Order
Arming yourself with some general knowledge on the tax code can help you avoid unexpected disappointments for your tax refund or deductions. The changes last year may impact you negatively, so it’s best to know that in advance. On the other hand, some types of life events can end up giving you a nice “tax reward.” Either way, it helps to know these details in advance.
Our main mission at NSO & Company is to help our clients lower their tax liability as much as possible, all while making sure they’re following the tax code. Fortunately, there are plenty of opportunities to give you the best of both worlds! You simply need to know what to look for—and that’s how we can help.
If you’d like to discuss your own situation, please don’t hesitate to reach out to our team. We’d be happy to get you on the right path and make sure your tax return is filed appropriately!
