If you’re getting ready to file your 2022 tax return, and your tax bill is higher than you’d like, there may still be an opportunity to lower it. If you’re eligible, you can make a deductible contribution to a traditional IRA right up until this year’s April 18 filing deadline and benefit from the tax savings on your 2022 return.

Rules for eligibility

You can make a deductible contribution to a traditional IRA if:

• You (and your spouse) aren’t an active participant in an employer-sponsored retirement plan, or
• You (or your spouse) are an active participant in an employer plan, but your modified adjusted gross income (MAGI) doesn’t exceed certain levels that vary from year-to-year by filing status.

For 2022, if you’re a married joint tax return filer and you are covered by an employer plan, your deductible IRA contribution phases out over $109,000 to $129,000 of MAGI. If you’re single or a head of household, the phaseout range is $68,000 to $78,000 for 2022. For married filing separately, the phaseout range is $0 to $10,000. For 2022, if you’re not an active participant in an employer-sponsored retirement plan, but your spouse is, your deductible IRA contribution phases out with MAGI of between $204,000 and $214,000.

Deductible IRA contributions reduce your current tax bill, and earnings within the IRA are tax deferred. However, every dollar you take out is taxed in full (and subject to a 10% penalty before age 59½, unless one of several exceptions apply).

IRAs often are referred to as “traditional IRAs” to differentiate them from Roth IRAs. You also have until April 18 to make a Roth IRA contribution. But while contributions to a traditional IRA are deductible, contributions to a Roth IRA aren’t. However, withdrawals from a Roth IRA are tax-free as long as the account has been open at least five years and you’re age 59½ or older. (There are also income limits to contribute to a Roth IRA.)

Here’s another IRA strategy that may help married couples save tax. You can make a deductible IRA contribution, even if you don’t work. In general, you can’t make a deductible traditional IRA contribution unless you have wages or other earned income. However, an exception applies if your spouse has earned income and you’re a homemaker or not employed. In this case, you may be able to take advantage of a spousal IRA.

The contribution limit

For 2022 if you’re eligible, you can make a deductible traditional IRA contribution of up to $6,000 ($7,000 if you’re age 50 or older). For 2023, these amounts are increasing to $6,500 ($7,500 if you’re 50 or older).

In addition, small business owners can set up and contribute to Simplified Employee Pension (SEP) plans up until the due date for their returns, including extensions. For 2022, the maximum contribution you can make to a SEP is $61,000 (increasing to $66,000 for 2023).

Contact us if you want more information about IRAs or SEPs, or ask about them when we’re preparing your return. We can help you save the maximum tax-advantaged amount for retirement.

© 2023

Once upon a time, there was the Internet. Relatively speaking, it was easy to understand. The Internet was (and is) a network on which any computer on the planet can communicate with other like-connected computers, enabling users to correspond and share files.

But the Internet wasn’t (and isn’t) satisfied with only computers. It wanted to connect your phone, too, and then your tablet and then your television. Fast-forward to today and almost everything electronic is connected to the Internet or could be — from refrigerators to HVAC to security systems.

This phenomenon is known as the Internet of Things (IoT), and it’s a topic on which business owners should gain some expertise.

Where it’s at

The extent to which the IoT is affecting your company, or soon will, depends on its industry and purpose, as well as perhaps where your operations take place.

For example, many construction companies have already had to adapt to installing HVAC systems with real-time monitoring and predictive maintenance capabilities. Meanwhile, manufacturers are using IoT tech to obtain and analyze production data, also in real time. And many other types of companies use IoT-connected vehicles to improve logistics and better handle fleet management.

Even if your business isn’t using any IoT devices or equipment just yet, this tech might be all around you as you work. Most newly or recently built offices and other facilities are “smart buildings” equipped with sensors throughout that allow property management to remotely monitor and control temperature, lighting and security. Many people also work from home in smart houses or in other locations on smart devices.

2 big reasons

If you haven’t already, start researching which IoT devices, equipment and systems are becoming commonplace in your industry. There are two big reasons for doing so:

1. To gain or maintain a competitive edge. Many companies today are undergoing “digital transformations” as they move away from paper-based processes and brick-and-mortar locations to become more tech-based enterprises. Although there are certainly risks and challenges, businesses that get the IoT right may be able to reduce costs, gain operational efficiencies, and enhance their ability to harness data to boost productivity and profitability.

Work with your leadership team and knowledgeable employees to identify how IoT technology might improve your business processes long-term. Don’t restrict your research to only production; investigate how the IoT could improve other areas such as HR, training and inventory tracking.

Once you’ve identified viable IoT technologies that may suit your company’s needs, learn everything you can about them. Carefully set budgets for procurement and implementation, making sure you’ll actually use any asset you acquire.

2. To heighten your awareness of cybersecurity. Perhaps the greatest risk of the IoT isn’t squandering money on technology that goes unused or doesn’t provide the desired results. It’s that every IoT-enabled item potentially creates a gateway that hackers could exploit to steal data, hold your systems for ransom or otherwise disrupt operations.

Some businesses might acquire and implement IoT-enabled assets “willy-nilly,” with little thought to cybersecurity, exposing themselves to great risk. Others might base themselves in smart buildings that aren’t properly protected — leaving them vulnerable to hacks or sudden shutdowns of key systems such as lighting or HVAC.

The bottom line is it’s critical to know, on an ongoing basis, precisely what’s connected to the Internet and how much of a threat it poses to your company.

Great potential and risk

Like so much business technology, the IoT holds both great potential and significant risk. Contact us for help assessing the costs and forecasting the financial impact of any tech investments you’re currently making or considering.

© 2023