Don't Make These Last-Minute Tax Mistakes in 2022

You could end up owing the IRS more money for no good reason if you fall victim to these blunders.

At this stage of the year, a lot of people are busy doing their holiday shopping, firming up their late-December travel plans, and counting down to 2023. But in the coming weeks, you have an opportunity to lower your tax burden for 2022. And so you'll want to steer clear of the following mistakes.

1. Not maxing out your IRA

If you're under the age of 50, you have the option to contribute up to $6,000 to your IRA this year. If you're 50 or older, you get a $1,000 catch-up opportunity that brings your total allowable contribution for the year to $7,000.

Many people unfortunately aren't in a position to max out an IRA this year because they're struggling to cover their basic expenses. Inflation has caused living costs to soar, and so if you've paused your IRA contributions because you've needed the extra money in your paychecks for immediate expenses, that's fine.

However, if you're in a position where you can afford to max out your IRA contributions for 2022, it pays to do so. The more money you put into that account, the more earnings the IRS won't be able to tax you on.

Not only that, but the more money that goes into your IRA this year, the more you'll get to invest right away. Since you'll need a nice amount of savings to cover your living costs in retirement, boosting your contributions in the coming weeks could do a lot for your future.

One thing you should know is that you technically have until next year's tax-filing deadline in April to finish funding your 2022 IRA. But you're better off contributing that money in the coming weeks so you can focus on funding your 2023 IRA once the new year begins.

2. Not donating unwanted goods to charity

If you itemize on your tax return, you may be aware that you can claim a deduction for charitable donations. But that doesn't just apply to cash contributions.

You can also claim a deduction for donated goods. So if you have piles of gently used toys, clothing, and gadgets you'll be dropping off at your local registered charity or place of worship, get a receipt for your donation. That way, it can serve as a write-off and save you some money.

3. Not selling losses in your brokerage account strategically

A lot of people are seeing losses in their brokerage accounts due to the volatile stock market we've been experiencing. And you shouldn't rush to unload all of your stocks just because they're down.

But if you have one or two specific stocks that have been performing poorly for years -- long before this year's stock market events -- then you may want to sell them at a loss in the coming weeks. Any loss you take on stocks can be used to offset capital gains. And if you don't have capital gains to offset, you can offset up to $3,000 of ordinary income.

So, let's say you sell a bum stock and take a $2,000 loss on it. If you sold another stock in your brokerage account at a $500 profit earlier this year, you'll cancel that out. You'll then be able to use the remaining $1,500 from your loss to offset $1,500 of your income, thereby saving yourself taxes on those earnings.

You're probably not all that focused on filing your taxes at this time of year. But avoiding these mistakes could result in major tax savings, so do your best to max out your IRA (or get as close as possible), keep all receipts for donations, and unload stocks that don't make sense to hang onto.