With the tax deadline extended to May 17th many will have the opportunity to wait a little longer to file their taxes. If you heeded our earlier advice and filed early you might think your tax efforts are over until next year. Whichever describes you there are options for legally reducing your taxes that should be considered every year.
Are there any strategies specific to this year if someone hasn’t filed yet?
For those that were eligible for stimulus payments but didn’t receive them, be sure to include this information on the IRS forms. You could be eligible for a recovery rebate credit when you actually file your 2020 taxes. It is also important to make sure you received payments for any qualified dependents and if you didn’t, these can be claimed as well.
Any other areas for those who still haven’t filed?
One is the above the line deductions. These are deductions that reduce your gross income and help lower your adjusted gross income. This can be deductions for student loans, teacher education expenses and IRA contributions. The goal is to reduce your taxable income as low as possible. The lower your AGI, the less tax you will owe.
What are strategies for 2021 that should be considered?
Look at ways to reduce your adjust gross income all through the year. One of the best is to contribute to a 401k or IRA throughout the year. With the higher standard deduction many people no longer itemize deductions but you should always review this option if there are times that you might be able to maximize this option over the standard deduction. Finally, make sure to always look for all credits that you might be eligible to receive, the IRS says 1 in 5 taxpayers miss a credit that is due them each year.
How can you control if you will have a refund or how much you owe?
Having the right amount of taxes withheld from each paycheck. You should review your situation and then complete a new IRS form W-4 if you want to change this amount. Remember as your family situation changes, income changes and taxes change your tax liability is going to fluctuate.
What is the best advice for tax planning and filing?
Consider filing the tax return as the last step of many in your annual tax planning effort, not the only step. Learn as much as you can about taxes and continually update your knowledge as your financial situation changes or tax laws changes. The more that you work on taxes year round, the more likely you can reduce the taxes that you owe each year.