Tax season has arrived! Personal Capital’s 2022 Tax Guide provides you with actionable information for filing your taxes in — yet another — very unusual year.
This year, Tax Day is set to fall on Monday April 18, 2022 (unless you live in Maine or Massachusetts then you may have until Tuesday April 19, 2022, due to state holidays. Please consult IRS Publication 509 for more details).
Your tax situation may have changed this year. Here are additional resources if you:
As our financial lives become more complex, taxes get complicated. Personal Capital is here to help. Our fiduciary financial advisors offer holistic tax planning services for individuals in our Private Client Group. Sign up for our free dashboard to schedule an appointment with a financial advisor.
Deadline to pay estimated individual income taxes on income in the fourth quarter of 2021. Not sure if you need to make estimated quarterly payments? The IRS has comprehensive information on estimated tax.
Deadline for employers to send out W-2 forms.
Deadline for businesses to send out some of the most common 1099 forms to recipients. There exists an extension for trustee reporting with the deadline of March 15.
Deadline to file for a six-month extension of time to file income taxes.
Deadline to file a 2021 tax return and pay any taxes.
Deadline for abroad filers. However, abroad filers must still pay any taxes owed by the normal deadline, April 15.
Deadline to file if granted an extension.
There are seven federal tax brackets for tax year 2021, and where you fall will depend on your filing status and your taxable income. Below are the 2021 tax brackets, which will inform your tax filing in 2022.
Head of Household
Married Filing Jointly or Qualifying Widow
Married Filing Separately
$0 to $9,950
$0 to $14,200
$0 to $19,900
$0 to $9,950
$9,951 to $40,525
$14,201 to $54,200
$19,901 to $81,050
$9,951 to $40,525
$40,526 to $86,375
$54,201 to $86,350
$81,051 to $172,750
$40,526 to $86,375
$86,376 to $164,925
$86,351 to $164,900
$172,751 to $329,850
$86,376 to $164,925
$164,926 to $209,425
$164,901 to $209,400
$329,851 to $418,850
$164,926 to $209,425
$209,426 to $523,600
$209,401 to $523,600
$418,851 to $628,300
$209,426 to $314,150
$523,601 or more
$523,601 or more
$628,301 or more
$314,151 or more
A tax deduction is an amount that the Internal Revenue Code allows you to subtract from your Adjusted Gross Income (AGI), which means it reduces your AGI to get to taxable income. There are two ways to claim deductions: the standard deduction or itemized deductions. You must choose one or the other and cannot do both.
The standard deduction is a flat deduction amount that is adjusted each year for inflation.
For tax years 2021 and 2022, the standard deduction amounts are as follows.
2021 Tax Year
2022 Tax Year
Married, filing jointly
Married, filing separately
Head of household
If you are older than 65 or blind, the standard deduction is $1,350 higher for 2021 and $1,400 higher in 2022 (per person). If you are using single or head of household filing status and over 65, the standard deduction is $1,700 higher for 2021 and $1,750 higher for 2022.
Your standard deduction may potentially be smaller if someone can claim you as a dependent.
While taking the standard deduction might be the path of least resistance, it might still be worthwhile to see if itemizing would save you any money.
Itemizing can allow you to reduce your taxable income by taking advantage of the many individual tax deductions that you might qualify for. Itemized deductions might add up to more than the standard deduction, but tax reform has completely changed the landscape of itemized deductions.
Alternative minimum tax is a mandatory alternative income tax designed for institutions, individuals, and trusts who use exemptions to pay lower income taxes. If you earn more than the AMT exemption, then you must calculate your taxes twice, once for regular income tax, and once for AMT (which eliminates many deductions). Whichever tax bill is larger is the one that is required to be paid. The Tax Cuts and Jobs Act kept the AMT but raised the exemptions and phaseouts.
AMT is highly complex; most high-earning individuals will want to work with a tax professional to determine if they are subject to AMT.
Single/Head of Household
Married Filing Jointly
Married Filing Separate
Source: Tax Foundation
1. Work with a tax professional
A certified tax professional will not only help you prepare your taxes, but will also provide guidance on when and how to file, and can help you ensure tax-efficiency going forward. If you have multiple investment accounts, have done any freelance work, made any major sales in securities or property, or have slightly more complex finances, working with a tax pro in your area is probably a good approach for you.
2. File online
Four electronic filing options for individual taxpayers are listed below.
Use IRS Free File or Fillable Forms
You can use IRS Free File if your adjusted gross income is $72,000 or less.
If you are comfortable doing your own taxes, try Free File Fillable Forms.
Use a Free Tax Return Preparation Site
The IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs offer free tax help and e-file for taxpayers who qualify.
Use Commercial Software
If your tax situation is relatively straightforward, commercial software such as TurboTax, H&R Block, or Quicken might be good options for you. Commercial tax prep software allows you to prepare and file your taxes. Your filing is transmitted through IRS approved electronic channels.
Find an Authorized e-file Provider
Tax pros accepted by the IRS’ electronic filing program are authorized IRS e-file providers. They are qualified to prepare, transmit and process e-filed returns. Ensure yours is authorized on the IRS website.
3. File by mail
The IRS provides a list of important mailing addresses. Due to staffing issues, processing paper tax returns could take several weeks longer. The IRS encourages taxpayers and tax professionals to file electronically.
Need a little extra time on your taxes this year? Here’s how to file for an extension with the IRS.
If you don’t think you can finish your 1040 tax return by April 18, there is no reason to panic. You can simply file an extension, which will give you six additional months (until October 17, 2022) to file your tax return.
Here are some tips to make filing an extension quick and easy.
Complete IRS Form 4868
To get a six month extension to file your income tax return, all you need to do is complete IRS Form 4868 – Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. Note that the name on the form says “Automatic Extension.” You don’t even need to provide a reason – just complete the form. However, you must file the Form 4868 by May 17 or you may be subject to a Late Filing Penalty.
Remember, This is not an Extension to Pay
While completing and filing Form 4868 will allow you a six month extension to file your tax return, there is no extension for paying any taxes you may owe. When completing Form 4868, you will be asked to estimate your tax liability and indicate the tax payments you have already made. You must pay the balance due by May 17. If you don’t pay the remaining tax due, or if you underestimate the taxes you owe, you’ll be subject to a Late Payment Penalty. If you overestimate your tax due and overpay, the overpayment will be refunded when you file your tax return. However, if you expect that you are due a tax refund, then no payment needs to be made when you file your extension.
There is No Increased Audit Risk When Filing an Extension
Some people fear filing an extension, thinking this will put them at additional risk for a tax audit. This is simply not true. The IRS has many programs and flags to identify tax returns for additional scrutiny. An extension is not one of those flags. Filing your tax return on extension puts you at no greater risk for an audit than if you filed before the May 17 deadline.
Read More: 10 IRS Audit Triggers for 2022
Don’t Forget Your State
If you need to file a tax return for a state (and/or the District of Columbia) that has an income tax, you can also get an extension for your state tax return. But, many states require that you complete a separate extension form with them. And, like the IRS extension, it is only an extension to file, not an extension to pay your taxes. Check your state tax authority’s website for their process.
These are the most common events the government wants to know about your investment portfolio and assets.
Capital gains and losses – e.g. profits or losses made from buying and selling stocks
Dividend / investment income – e.g. cash received from stock (dividend) or income received from other types of investments. Dividends and income are taxed differently
Interest paid – e.g. home mortgage and student loan interest
Distributions – e.g. from retirement, profit sharing and HSA plans
Royalties, rents and other non-employee compensation – e.g. rental property income and contracting work
Real estate sales – e.g. selling your house
Tax-efficient investing is crucial for growing your net worth. Learn how to minimize your tax burden with our free guide 5 Tax Hacks Every Investor Should Know.
What are 1099 Forms?
Typically, after each calendar year ends, banks, brokers and other institutions generate tax forms that report to the IRS any relevant events that occurred during the prior year. Many of the forms used are known as 1099 tax forms. There are several different variations of the 1099 depending on the event that took place and associated account type. The IRS and account holders should each receive a copy.
Corrected 1099 Forms
If you receive a corrected 1099 from your financial institution or account custodian, there is no need to panic! Revised 1099s are quite common and are issued if there is any change or discrepancy in the reporting of gains or dividends from any security in your portfolio. Usually it’s not the custodian who is causing a need for revision. However, they do need to issue corrected 1099s, no matter the difference of the corrected amount (revised 1099s can sometimes be issued over a few cents!).
Since a diversified portfolio often includes several complex investments like mutual funds, your custodian could be aggregating information from hundreds or thousands of securities. If any of these securities issue a correction, then a revised 1099 must be issued.
In many cases, you might not have to take any action if you receive an updated 1099 form (the 1099-DIV form, which deals with dividends, is one of the most commonly revised 1099 forms). However, if the amount is large enough to impact your tax return, then you can file an amended return.
We recommend that investors consider filing taxes in mid- to late-March if they have a taxable account with mutual funds or ETFs. This will minimize the need to refile, supersede or amend tax returns for the year.
Common Investor Tax Forms
Capital gains or losses from trades on publicly traded securities (e.g. stocks and ETFs)
The “B” stands for broker or barter exchange. This form includes details such as short-term versus long-term gains or losses, as well as other important transaction information, including your cost basis, date of sale, ticker symbol, quantity sold, gross proceeds, and federal tax withheld.
Dividend payments and other distributions
This form reports if you received dividend payments in your portfolio last year or received a capital gains distribution on one of your mutual funds. If you held any foreign securities domiciled outside the United States, any foreign taxes you paid are reported on this form. It also reports ordinary dividends separately from qualified dividends, and specifies if you had any state or federal taxes withheld from your distributions.
Banks, savings institutions, and brokerage firms typically generate these forms when you receive interest payments in your accounts. Common account types that receive interest income include checking, savings, money market, CDs, U.S. savings bonds, and investment accounts holding interest-bearing securities.
This form is used to report various types of non-employee compensation. Examples include money earned as an independent contractor, royalty income, prize monies, awards, and rental property income.
Original issue discount
If you purchased a bond or note for an amount less than face value last year, you could receive this form. It reports when the redemption price or face value of your investment was higher than its issue price. Some examples include income from zero-coupon bonds, T-bills, or peer-to-peer lending.
Distributions from qualified plans
You could receive this form if you had distributions from retirement plans, profit-sharing, annuities, pensions, insurance contracts, and disability payments. You should receive a separate 1099-R for each account and distribution code. If you rolled over an employer-sponsored plan into an IRA, you should also expect to receive Form 5498, which should balance out the distribution reported on your 1099-R.
One account with multiple events in one year
A 1099 Consolidated takes multiple 1099 forms and compiles them all together into one file. For example, a consolidated 1099 statement could include 1099-DIV, 1099-INT, 1099-B, and a 1099-OID combined in one pdf.
We are not licensed tax professionals. All insight provided represents a courtesy extended to you for educational purpose, and you should not rely on this information as the primary basis of your tax planning decisions. You should consult qualified legal or tax professional regarding your specific situation. No part of this blog, nor the links contained therein, is a solicitation or offer to sell securities. Third party data is obtained from sources believed to be reliable; however, Personal Capital Corporation (“Personal Capital”) cannot guarantee the accuracy, timeliness, completeness or fitness of this data for any particular purpose. Third party links are provided solely as a convenience and do not imply an affiliation, endorsement or approval by Personal Capital of the contents on such third party websites.