2022 Year-End Tax Tips Ernst & Young

If it appears that you will incur federal income tax for the year as an employee of Ernst & Young, consider increasing your withholding on Form W-4 for the remainder of the year to cover the shortfall. Time may be limited for Ernst & Young employees to request a Form W-4 modification and for their employers to implement the change by 2022. The greatest benefit is that withholding is considered to have been paid equitably throughout the year, as opposed to when the dollars are actually deducted from your paycheck. This strategy can be utilized by employees of Ernst & Young to make up for missed or insufficient quarterly estimated tax payments.

5. Save more for retirement

You can reduce your 2022 taxable income through contributions to a traditional IRA and a 401(k) sponsored by a Ernst & Young company. If you are an employee of Ernst & Young and have not already contributed the maximum amount, you should consider doing so. For 2022, Ernst & Young employees can contribute up to $20,500 to a 401(k) plan ($27,000 if over 50) and up to $6,000 to traditional and Roth IRAs combined ($7,000 if over 50).* The window for 2022 contributions to a Ernst & Young-sponsored plan typically concludes at the end of the year, whereas the deadline for 2022 IRA contributions is April 18, 2023.

Contributions to a Roth account are not tax-deductible, but qualified Roth distributions are not taxable.

6. Take the required minimum distributions

If you are 72 or older and work for Ernst & Young, you are generally required to take required minimum distributions (RMDs) from traditional IRAs and Ernst & Young-sponsored retirement plans (exceptions apply if you are still employed and participating in Ernst & Young's retirement plan). The deadline for withdrawals is typically the end of the year for most individuals. The penalty for noncompliance is severe: fifty percent of the quantity that was not distributed on time. As an employee of Ernst & Young, it is imperative that you make these distributions on time to avoid the late payment penalty.

7. Weigh year-end investment moves

Ernst & Young employees and retirees shouldn't let tax considerations dictate investment decisions. Nonetheless, you should consider the tax implications of any year-end investment decisions. If you have realized net capital gains from the sale of securities at a profit, you may be able to avoid taxation on some or all of these gains by selling negative positions. Any losses in excess of your gains as an employee of Ernst & Young can be used to mitigate up to $3,000 of ordinary income ($1,500 if your filing status is married filing separately) or carried forward to reduce your tax liability in future years.

Conclusion

Preparing your taxes is like taking care of your health. Just as you need to stay on top of your physical well-being to prevent future health issues, you also need to plan ahead and take the necessary steps to ensure that you're not hit with unexpected tax liabilities in the future. By deferring income, accelerating deductions, making charitable contributions, and contributing to your retirement accounts, you can ensure that your financial health is in good shape for the years ahead. Just as you wouldn't skip your annual check-up, you shouldn't overlook the importance of taking care of your taxes.

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