2022 Year-End Tax Tips for Target Employees

Here are some things for Target employees and retirees to consider as they weigh potential tax moves between now and the end of the year.

1. Defer income to next year
Target employees must consider opportunities to defer income to 2023, particularly if you think you may be in a lower tax bracket then. For example, you may be able to defer a year-end bonus or delay the collection of business debts, rent, and payments for services. As a Target employee, doing so may enable you to postpone payment of tax on the income until next year.

2. Accelerate deductions
Target employees and retirees should also look for opportunities to accelerate deductions into the current tax year. Making payments for deductible items, such as state taxes, qualified interest, and medical costs, before the end of the year (as opposed to early 2023) may have an impact on your 2022 return if you itemize deductions.

3. Make deductible charitable contributions
You may generally deduct charitable contributions as an employee of Target if you itemize deductions on your federal income tax return. However, the deduction is only allowed for charitable contributions that total 50% (or 60%, if you donate cash to public charities), 30%, or 20% of your adjusted gross income (AGI), depending on the kind of property you donate and the organization you donate to. (Overages may be carried forward for a maximum of five years.)

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4. Bump up withholding to cover a tax shortfall
If it appears that you, as a Target employee, will be required to pay federal income tax for the year, you should think about extending your withholding on Form W-4 for the balance of the year in order to make up the difference. There might be a deadline for Target employees to request changes to their Form W-4 and for Target to comply with those requests in order for 2022. The primary benefit of this approach is that withholding is recognized as a yearly installment rather than being deducted at the time of employment. Employees of Target may use this technique to make up for inadequate or nonexistent quarterly anticipated tax payments.

5. Save more for retirement
Deductible contributions to a traditional IRA and pre-tax contributions to a Target-sponsored retirement plan such as a 401(k) can reduce your 2022 taxable income. As a fortune 500 employee, if you haven't already contributed up to the maximum amount allowed, consider doing so. For 2022, Target employees can contribute up to $20,500 to a 401(k) plan ($27,000 if you're age 50 or older) and up to $6,000 to traditional and Roth IRAs combined ($7,000 if you're age 50 or older).* The window to make 2022 contributions to a Target-sponsored plan generally closes at the end of the year, while you have until April 18, 2023, to make 2022 IRA contributions.

*Roth contributions are not deductible, but Roth-qualified distributions are not taxable.

6. Take the required minimum distributions
If you are a Target employee age 72 or older, you generally must take required minimum distributions (RMDs) from traditional IRAs and Target-sponsored retirement plans (special rules apply if you're still working and participating in Target's retirement plan). You have to make the withdrawals by the date required — the end of the year for most individuals. The penalty for failing to do so is substantial: 50% of the amount that wasn't distributed on time. As a fortune 500 employee, making these distributions in a timely manner is essential as to avoid the late penalty.

7. Weigh year-end investment moves
Target employees and retirees shouldn't let tax considerations drive investment decisions. However, it's worth considering the tax implications of any year-end investment moves that you make. For example, if you have realized net capital gains from selling securities at a profit, you might avoid being taxed on some or all of those gains by selling losing positions. As a Target employee, any losses over and above the number of your gains can be used to offset up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your taxes in future years.

Tags: Financial Planning , Tax , Retirement , 2022

For more information you can reach the plan administrator for Target at 10 South Dearborn Street 48th Floor Chicago, IL 60603; or by calling them at 1-800-440-0680.