At first glance, February might not seem like a very important month in your financial life. The year is just getting started, you’re getting a little breathing room from holiday spending, and the deadline to file taxes is still over two months away. As it turns out, however, February can be a critical month, especially if you’re making a conscientious effort to stay on top of your finances. To help you achieve your goals, we’ve created a “Financial To-Do List” of the five most important items to check off if you want to stay in control of your financial well-being.
Make sure you have your 1099s and W2s
If you receive income that is reported on form 1099-MISC, these forms are due to you by February 15th. Most people who work as a freelancer or independent contractor receive this form or if you earned over $600 during the year for any single company. The same deadline applies for form W2 – the Wage and Tax statement. You should have one of these in hand from every company for which you were an employee during the year.
If these documents are still missing, call the Human Resources Department for the company that owes you the form and check in. Make sure they don’t have erroneous contact information for you, or misplaced your 1099 paperwork when you started your contract. Remember, it’s your responsibility to report this income to the IRS.
Research and gather tax documentation on deductible items
It is important to do your research and stay current on the most current tax deductions, as the IRS tends to make adjustments year to year. For 2022, expect a new, higher standard deduction of $12,950 for individuals and $25,900 for married couples filing jointly. Some taxpayers may benefit from compiling their deductions, i.e. saving deductible outlays for a single year in order to exceed their standard deductions.
Find an Accountant or choose a tax software
This brings us to the next logical step. If your financial status has changed significantly over the previous year, or if your at all confused or unsure about your current tax situation, it may be time to consult a professional for tax planning and advice. April 18th may seem far off, but tax professionals book up quickly, and delays on your part could force you to file for an extension on your taxes. Remember, an extension gives you extra time to file, but not extra time to pay. After you file an extension, if you owe taxes when you file your return, you might also have to pay penalties and interest on the tax due.
If you decide to file your taxes online with TurboTax or Quicken, these platforms should have all the new tax changes built into the software. You need to ask yourself – is your tax situation simple enough that online filing will minimize your payment and maximize your return?
Check your monthly budget for accuracy
If you started a monthly budget for 2022, good for you! Now is the time to go over January’s numbers and compare what you budgeted for the month and what you actually spent. Be honest! Maybe you didn’t budget money for the club, but if you spent $100 that night, update February’s budget to reflect your additional entertainment expenses…or learn to stay at home!
If you haven’t already done so, fund your last year’s IRA this month
It’s important to take the maximum, tax-free contribution to your IRA. You have until the April tax filing deadline to make this contribution for 2021. If you checked your budget and have funds left over, this would be the time to make that contribution.
If you find yourself suddenly faced with a balance due to the IRS, consider paying it off with a personal loan from Credit Direct. The IRS is the largest and most aggressive collection agency in the country. A debt to the IRS means high interest and penalty payments, and a default can lead to seizure of your home or personal assets. Personal loans from Credit Direct are unsecured, meaning they require no collateral, and payments can be created to work with your individual needs. Call one of our experienced financial consultants today to discuss your needs.