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Consider this list of new year’s financial to-dos

February 3, 2022

The Bridgewater Advisors Team

As 2022 gets into gear, now is a great time to review some of those seemingly mundane financial matters that can come to bite you come tax time, or in other ways.

Here’s a list of matters worthy of your attention.

Check your pay stub 2022-01-03

Overall, it’s a good idea to make sure your tax withholdings are appropriate. Check with your accountant to make sure withholdings are in line with your tax picture.

Retirement program contribution limits have been raised on qualified employee retirement plan deferrals – think 401(k)s and 403(b)s. The new limit for 2022 is $20,500, up from $19,500 in 2021 and 2020 for both Roth and traditional contributions to these types of plans.

Don’t forget to include “catch-up” contributions. Individuals who are age 50 or over by the end of this calendar year can make annual catch-up contributions of up to $6,500 in 2022 (an amount which has held steady since 2020).

Please note: Self-employed retirement plan contribution limits have also been adjusted for 2022. Please be sure to check with your accountant or advisor to ensure your contributions reflect these changes.

Collect all important tax documents in one place

Right around now, you’ll be getting bombarded with end-of-year statements and other documents you will need to file your taxes or extension by April 18th, 2022. Make sure you have a box, folder or drawer that acts as the sole place to put these.

In addition to the more common items such as 1099s, W-2s, or K-1s, some other items that might slip through the cracks include:

  • Child Tax Credits
    For those that received advance child tax credits, save the letter that reports your total advance. Note: For married couples filing jointly, you might receive two letters that need to be added together.
  • Cryptocurrency tax considerations
    If you sold or purchased items with cryptocurrency, you will likely have gains/losses which are reportable on schedule D of your tax return, just like any other capital transaction. The IRS is paying attention this year and has included a question about cryptocurrency on the first page of your return. So be sure to inform your tax preparer sooner rather than later about any eligible transactions. Your tax preparer should be able to provide advice and guidance to make sure your activity is reported thoroughly and accurately. Activity that is not reported could leave you at risk for audits, fines, and penalties.

Plan ahead for your gifts and donations in 2022

The annual gift exclusion has been increased to $16,000 for 2022, which means a couple filing jointly can make gifts of up to $32,000 without impacting the lifetime gift exclusion. Common gifts include outright cash, transfers to a custodial account, gifts into an irrevocable trust, or gifts into a 529 college savings plan.

The lifetime gift exclusion has also increased to $12,060,000, again doubled for married couples filing jointly. For clients who previously maximized gifts at the prior lifetime limit of $11,700,000, you can now top-up to the new number. This is likely most applicable for those of you who utilized Spousal Limited Access Trusts (SLATs) to maximize your lifetime gifting.

If you make use of Qualified Charitable Distributions (QCDs), you can make them anytime throughout the year, though it might be best to do so earlier rather than later. This allows ample time for processing and ensures checks will be properly cashed by the charities during the same tax year.

This is not a comprehensive list, but it hits some key areas that deserve your attention. Please don’t hesitate to contact us with any questions about these, or other matters – that’s why we’re here.

– This is not a solicitation, or an offer to buy or sell any security or investment product, nor does it consider individual investment objectives or financial situations.
– Information in this material is not intended to constitute legal, tax or investment advice. You should consult your legal, tax and financial advisors before making any financial decisions.
– IRS Circular 230 Disclosure: Pursuant to IRS Regulations, neither the information, nor any advice contained in this communication (including any attachments) is intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein