Before we know it, we’ll be in the thick of tax season. What is considered a hectic time of year for even the most basic filer can seem downright daunting to those with small businesses. Independent insurance agents often have very technical tax filings that can make the April 18th deadline loom larger than it does for most.
But it’s not all doom and gloom. Filing your taxes can be relatively simple when you prepare ahead of time and understand the types of deductions that your personal business situation allows. Read on for our top five tax season tips for independent insurance agents.
1. Prepare to be prepared
The last couple of years have been a tax prep anomaly. Typically, the annual filing deadline is April 15, but the coronavirus and all the havoc it caused pushed the 2020 and 2021 deadlines further out. Since we’re still in a pandemic, it wouldn’t be out of line to assume that we are going to receive the same deadline extension that we saw last year. Unfortunately, there has been no extension announcement, and the IRS seems to be operating as normal for the 2022 filing season. The only slight variance is that the due date is April 18 because the typical date of April 15 falls on a federal holiday. So be prepared to meet the semi-usual deadline again for the first time since the pandemic started.
If you contribute to an IRA, it’s also important to note that the contribution deadline for 2021 will also end on April 18 in 2022. Last tax season, the contribution deadline was extended due to the tax filing extension, so that deadline will also return to normal for 2022.
2. Track what documents you need
With the independent agent life comes a lot of paperwork. Managing it all and trying to keep a running list of requirements in your head for tax season can be nearly impossible. Giving yourself time to document the paperwork you’ll need to file taxes can help alleviate that yearly burden.
Save yourself the stress and start documenting the paperwork you will need to hunt down at the beginning of the year. H&R Block has a convenient printable list that you can start checking off to make sure you have everything you need to optimize your tax return.
3. Learn about tax season deductions
Insurance agents are usually self-employed and/or independent contractors. This unique business situation allows for tax deductions that may not be available to the average office worker. There are several beneficial deductions for independent insurance agents to know about as the tax season approaches, including expenses incurred for marketing and even insurance conferences that you attend throughout the year.
As an additional quick tip: You are unlikely to find a fully comprehensive list of deductions online, so looking into working with a tax professional may be in your best interest to take advantage of all the deductions you are owed.
4. Know what’s changing in 2022
If there is one constant in life, it’s that tax requirements, deductions, and credits are never constant, and they change annually. 2022 is a particularly thin tight rope to walk with all the credits that families, small businesses, and independent contractors may have received during the pandemic.
Know what’s changed by following the latest updates from the IRS, including information on the child tax credit and the recovery rebate credit.
5. Be on high alert for scams
While you should always make it a practice to be on high alert for any potential phishing activity, tax season is prime time for scammers. You need to communicate sensitive information throughout the entire process and adding the stress of tax time to the mix can make people less aware of fraudulent emails meant to look like official communications from the IRS, your tax preparation program, or even your accountant. According to the IRS site, “the IRS doesn’t initiate contact with taxpayers by email, text message or social media channels to request personal financial information.”
Keep up to date with the latest tax season scams on the IRS website, and learn about how to decipher whether that caller is really the IRS or if you should hang up. One of the safest methods to avoid being scammed is to never give out personal information if you are the one being contacted. Let the caller know that you are going to hang up and call them back with an official phone number from their website.
GAINSCO tax time tip
Many of our agents require a 1099-NC form for filing purposes. If your commission payments meet a certain threshold and you are designated as the sole proprietor and or individual, GAINSCO will send you a 1099-NEC to both you and the IRS.
To see if you meet the specific payment threshold, or to request a 1099 directly, please contact your GAINSCO sales leader. For more independent agent tips, see our latest blog posts on our website or follow us on LinkedIn.
This site’s articles and news items include information from different third-party sources not associated with GAINSCO Auto Insurance® (including MGA Insurance Company, Inc. and its subsidiaries). While our authors believe this information to be dependable and correct, GAINSCO does not express certainty in the accuracy or reliability of the information provided. GAINSCO cannot be held liable for, and does not endorse or approve, either implicitly or explicitly, the content of any third-party sites that are hyperlinked from this page. The information provided is intended as informative-only content and is not to replace the guidance of qualified professionals or to affect coverage under any applicable insurance policy. Suggestions given within the articles are not an exhaustive list of all loss control measures. GAINSCO makes no guarantees of results from using the information within our posts.