Top 5 US tax tips for your upcoming beach reading
The summer season is here (and so are some summer-time related puns to keep tax fun). We have a treat for your beach reading pleasure; the second in a series of posts which we refer to as Everything you didn’t learn about taxes in school.
1. Don’t ever get tide down by penalties and interest and file your U.S. Tax Extension Form 4868 (or 2350 possibly, for those that moved overseas in 2021) by June 15th, 2022. If you were living outside of the US on April 18th, 2022, your two-month automatic extension will run out. Make sure to file a Form 4868 to avoid a late filing penalty. If you think you owe tax, you may want to make a payment with the extension to prevent or limit the interest and late payment penalties.
2. Make sure things aren’t getting out of sand and start making your 2022 U.S. estimated tax payments. Estimated payments are due April 18th, June 15th, September 15th, 2022, and January 17th, 2023. If you are expecting to owe at least $1,000 in tax for 2022 you may want to make estimated payments. There are various methods to calculate the estimate.
3. It’s a boat time to go file your 2021 FBAR. While you have an automatic extension to file through October 17th, 2022, it’s better to file now, so as not to forget later. If the sum total of all your foreign financial accounts’ highest balance during the year is greater than $10,000, you have an FBAR filing requirement. This includes accounts you own yourself, jointly or have signature authority over. While this is just an informational form, steep penalties can be levied if you file late or don’t file the form, when required.
4. With US college prices escalating these days, consider contributing to a 592 savings plan for your children. This is a fintastic opportunity. These plans provide tax-free growth and are not part of your estate. While there is no limit that you can contribute, contributions are considered a gift and if you contribute more than $16,000 in a year to any one individual, you may need to file a gift tax return. There is an option to contribute a more significant amount by using up future years’ gift limits. You can do this up to five years’ worth of gift limits which is currently the equivalent of $80,000 per current gift tax limits rules.
5. Water you doing, my friend? Are you of retirement age? Do you have US pensions? Are you taking distributions yet? Depending on the type of retirement plan, you may have a required amount you need to take out aka Required Minimum Distribution (RMD). If you don’t take out the RMB, you will face a penalty.
Contact us if you have any questions about the tips given above.