With the current pandemic and uncertainty happening in the world around us, there is an emphasis from the IRS and State Agencies that all tax filings are accurate and on time for the 2021 tax season. Based on the information provided by the IRS, we are here to give you a few helpful tips on what you need to know and what you need to do in order to be ready for filing your tax returns. And here we go...
GET ORGANIZED: Tips
It is important that you gather all of your tax records, receipts, and documents into one designated place. This will ensure that when it comes time to file, all forms may be filled out quickly and accurately. Keeping accurate records will make tax filing seamless and may also help to avoid overlooking deductions or credits. Start early, save everything.
Most income is taxable: Taxpayers should gather income documents such as their W-2 Forms from their employer(s), Forms 1099 should be acquired from banks, investment firms, and other payers or sources of income. Additionally, records of virtual currencies or other income should be annotated. This also includes unemployment income, refund interest, and income from the gig economy (ie: uber, postmates, etc).
Form 1099-NEC: Beginning in 2020, individuals may receive Form 1099-NEC, Nonemployee Compensation, rather than Form 1099-MISC, Miscellaneous Income. This is if they performed certain services for, and received payments from, a business. If you are an employer, please refer to the Instructions for Form 1099-MISC and Form 1099-NEC to ensure that you are filing the appropriate form and are aware of this change.
Notice 1444: Taxpayers may need Notice 1444, Economic Impact Payment, which shows how much of a payment they received in 2020. This amount is needed to calculate any Recovery Rebate Credit they may be eligible for when they file their federal income tax return in 2021. People who did not receive an Economic Impact Payment in 2020 may qualify for the Recovery Rebate Credit when they file their 2020 taxes in 2021.
Address Changes, Name Changes, etc: Taxpayers should notify the IRS of address changes and notify the Social Security Administration of a legal name change to avoid delays in tax return processing.
ITIN: Taxpayers with an Individual Tax Identification Number (ITIN) should ensure it hasn’t expired before filing a tax return in 2021. For example, ITINs not used on a federal tax return at least once in the last three years will expire on Dec. 31, 2020. If the ITIN has expired, IRS recommends taxpayers submit Form W-7, Application for IRS Individual Taxpayer Identification Number, now to renew an ITIN. Taxpayers who fail to renew ITINs before filing a tax return next year could face a delayed refund and may be ineligible for certain tax credits.
Tax Withholding Estimator: Time is running out to use the Tax Withholding Estimator, a tool on IRS.gov designed to help determine the right amount of tax to have withheld from paychecks. Taxpayers can use the Tax Withholding Estimator to help determine if adjustments to withholding are necessary. Withholding changes can be made by submitting a new Form W-4 to the taxpayer’s employer. Taxpayers receiving substantial amounts of non-wage income like self-employment income, investment income, taxable Social Security benefits and in some instances, pension and annuity income; should make quarterly estimated tax payments. The last payment for 2020 is due on Jan. 15, 2021. Payment options can be found at IRS.gov/payments.
Year-End Tax Deduction Tips: Embrace year-end tax deduction planning. This will help you plan your deductions and credits, as well as estimate your tax refund and/or tax payments by December 31. Make sure you take any qualified tax breaks by December 31 to save money on your taxes. Tax Deductions and Credits to Claim by December 31: Before you prepare and file your 2019 Tax Return make sure you're aware of all the 2019 tax credits and deductions you can claim (if you're qualified) before New Year's Eve!
Tax Preparation and Planning Checklist: Need help keeping track of all these tax documents? Print out our tax return checklist and see how easy it is to "check off" all the W2's, tax credits, and other items you need to file your return!
Be Prepared - Tax Time Planning: January 1 - April 15
In most years, April 15th is the general tax return filing/tax payment deadline. If you missed the April 15th deadline, you may request an extension to e-file your return up and to October 15, 2021. Most states also require State Income Tax Returns to be submitted during the same time period, but some of them have a deadline of May 1st (as opposed to April 15th).
During Tax Time you will enjoy the benefits of proactive tax planning as list. A recap of the above:
Make sure you have received all W-2 forms, 1099 forms, and other tax documents before you start preparing or e-filing your IRS and/or State Tax Return.
If you have questions about your estimated 2020 Tax Year results, contact a Tax Expert. We are here to help!
Don't forget that electronically filing your taxes is easier, more accurate, and faster than paper filing. Book an appointment with your Tax Preparer.
Tax Time does not have to be overwhelming or intimidating; keep good records, save receipts, and communicate with your Tax Preparer - a good Tax Preparer will help you strategize and plan. Book your tax appointment today.