Act Now and Reduce Tax Stress Later

Rejoice! The 2020 tax filing season is finally over! That is, unless you needed more time to file and requested an extension after reading my May 5th blog post (https://buff.ly/3t0X73l). Between all the changes from the COVID-19 relief packages and deadline delays, this tax filing season was another wild ride for taxpayers and their preparers. 

Well, how did it go for you? Stressful? Expensive surprises? Not knowing what to expect makes an already stressful situation – doing your taxes – even worse.  Here are a few actions to take now that will reduce your tax stress later:

  • Do a “Paycheck Checkup” 

Did you owe a lot when you filed for 2020, or did you get a big refund, aka an interest-free loan to the government? An IRS Paycheck Checkup can help to make sure you don’t get an expensive surprise when you file your 2021. Use this online tool to see if you need to change your withholdings https://www.irs.gov/paycheck-checkup. Have investment other non-wage income? Check on whether you need to make quarterly estimated tax payments here https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

  • Make Tax Payments Electronically

Using any of the IRS electronic payment options puts you in control of paying your tax bill. You determine the payment date and receive an immediate confirmation from the IRS. It’s easy, secure, and much quicker than mailing in a check or money order. Go to IRS.gov/payments to see all the free electronic payment options: online, by phone or from a mobile device using the latest encryption technology. Check with your state for online payment options.

  • Contribution Deduction for Nonitemizers

Even if you don’t itemize and take the standard deduction, you may be eligible to take a charitable deduction for cash contributions up to $300 made to qualifying charities in 2021. Eligible contributions must be made via cash, check or credit card. Use the IRS Interactive Tax Assistant tool – Can I Deduct My Charitable Contributions? – for answers about cash donations.

  • Tax Credit Eligibility

You could qualify for credits like the Child Tax Credit and Child and Dependent Care Credit. You might be able to claim the Credit for Other Dependents if a dependent is not your child. If you pay qualifying higher education costs for yourself, your spouse, or a dependent, you may be eligible for education tax credits or deductions. Taxpayers earning $57,414 or less can check if they qualify with the EITC Assistant, available in both English and Spanish.

Now, immediately after filing your 2020 tax returns, is the perfect time to act and reduce tax stress next filing season. Whether you prepare your own taxes or use a tax preparer, the more you know in advance, the less stressful that your tax return filing experience will be for 2021.

2018 Tax Planning – The New Tax Law Will Impact Your Return

It’s summer! Know what that means? Time at the beach? Sure! Road trip? Absolutely! Summer camp? Well, almost… Summer Camp for Tax Professionals, aka the IRS Tax Forum, just happened here in Washington, DC. It’s perfectly timed between the April and October tax filing deadlines, with a chance to learn about tax trends, changes, and issues from the IRS and experienced tax professionals.

 

Timing was better than ever this year because of all the sessions on the Tax Cuts and Jobs Act that was passed in December 2017. The 2018 IRS Tax Forum provided details about how the new tax law will impact nearly every household and business in the nation. Tax professionals also got insight on new security and compliance procedures implemented by the IRS, state agencies and tax software vendors to reduce identity theft and fraud.

 

2018 IRS Tax Forum sessions covered a range of updates and issues, including:

 

  • Changes to employer tax withholding tables that do not consider the taxpayer’s specific situation. This could result in an expensive surprise next tax filing season.
  • New qualifying dependent credits and higher income limits for taking dependent and child tax credits. These credits partially offset elimination of personal exemptions.
  • Itemized deduction limits for state-level taxes and mortgage interest.
  • Elimination of moving and miscellaneous itemized deductions.
  • Clarification about eligibility for the new Qualified Business Income deduction for Sub S Corporations and Partnership clients (i.e., pass-through businesses).
  • New requirements for Sub S Corporations and Partnerships to track and report stock and loan basis.
  • Changes to depreciation and expensing rules for business assets.

 

There’s more. Too much for one blog post. Now is a great time for every taxpayer to check into how the new tax law will impact her or his tax bill for 2018. In a few months, it will be too late to make a change.

 

If you’re up for re-visiting your tax projections yourself, there’s plenty of online help. Guidance to project taxable income, tax withholding, deductions and tax liabilities is at the IRS website, https://www.irs.gov/individuals/irs-withholding-calculator for employees and https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes for business owners.

 

Not sure you want to DIY your taxes? Want help figuring out how the Tax Cuts and Jobs Act will impact you? Get a referral for a qualified tax professional, preferably one who went to Summer Camp for Tax Professionals, aka the IRS Tax Forum.