In the knick of time! Your 2021 Tax Time Reminders
It’s everyone’s favorite time of year! No, it’s not the Cherry Blossom Festival nor is it ComiCon or National Donut Day. It’s tax season! Many people have probably got a jump on the tax deadline and have filed returns already; note that your tax return for 2021 is due on Monday April 18. If you need more time, you have until Monday October 17, 2022 to file but you must file for an extension by the original tax filing due date.
Whether or not you have already filed, you may be able to take advantage of some of these tax tips below:
1. If you haven’t already heard, the IRS is experiencing a huge backlog in reconciling returns from the past few years. A series of emergency stimulus payments and lack of staff have contributed to delays in processing returns.
For this reason, and to expedite the processing of your return, make sure to file electronically and enroll in direct deposit. This will help to make the processing and any refund as swift and seamless as possible.
2. Did you know that if your income is $72,000 or less, the IRS has free fillable software that allows you to prepare your returns for free. In fact, most tax preparation software is free if you are below that income requirement. Check out this and this for more info.
In addition, there are services to help older filers prepare their tax returns for free. Tax Counseling for the Elderly (TCE) is a group of IRS-certified volunteers who help prepare tax returns and provide tax advice to individuals age 60 and over. https://www.benefits.gov/benefit/722
3. Even if you claim the standard deduction ($12,550 for single filers, $25,100 for married filers), you can also claim a deduction for charitable giving up to $300 (single) or $600 (married filing jointly) in 2021. Normally, only individuals who itemize may claim a charitable deduction but the CARES Act that was passed in 2020 to provide relief during the pandemic allowed for individuals who claim the standard deduction to also take a limited charitable deduction. This provision was extended to 2021.
4. If you have not yet funded your IRA, Roth IRA, Solo 401(k), or SEP, you can still make a contribution for 2021 until the tax filing deadline. This is also true for Health Saving Accounts (HSAs). Refer to the chart below to determine your contribution limit for the retirement account you have set up.
Traditional IRA
$6000/$7000 (age 50+)
Roth IRA
$6000/$7000 (age 50+)
Health Saving Account (HSA)
$3600/4600 (age 55+)/$7200 (family)
SEP
Cannot exceed lesser of 25% or $58,000
Solo 401(k)
$58,000/64,500 (age 50+)
If you have a non-working spouse, you might consider using your income to fund a spousal IRA or Roth IRA. Depending on your income, you may be able to claim a tax deduction on some or all of your retirement plan contributions. Refer to these IRS sources.
5. If you have young children, make sure that you have received your child tax credits for 2021. Recall that as part of the Covid-era stimulus program, eligible families were entitled to advance child care tax credits on a monthly basis in 2021. Make sure that you received what you were entitled to and include any remaining claim on your return. The IRS has great resources on how to claim the child care tax credit here.
Even if you have already filed your return, you can file an amended return to take advantage of any tax deduction, credit or benefit before the filing deadline.