A New Year and It’s Time To Think Taxes

Finally, 2020 is in the rearview mirror and we are all looking forward to a healthier 2021 around the globe.  And, as we look forward, we all have income taxes to look forward to. 

So, what can you do NOW to ease the overwhelming feeling when you start the process?  Here are some helpful tips:

  • Start now to assemble your information, don’t wait until the last minute. 
  • Don’t rely upon receiving the necessary tax document; make a list of your income sources which can be used to check off the tax documentation as you receive the same.  This will help to know when you have received all expected information.
  • Have you made charitable contributions?  Now is the time to organize the receipts and acknowledgments of those contributions.  Remember that, for 2020, you are able to take a deduction of up to $300 for charitable donations if you do not itemize deductions.  If you itemize deductions, you may report all of your charitable donations.  Remember:  the contributions must be made to qualifying organizations – those recognized by the IRS.
  • If you are one of the unfortunate people who have had considerable medical expenses, you can gather all of your receipts for these expenses.  Remember that medical expenses include not only doctors and prescriptions, but also premiums paid for medical insurance, long-term care insurance, eyeglasses, hearing aids, etc.  Don’t overlook the opportunity to claim a deduction.
  • If you have an account for securities, it is a good idea to put your December statement with your tax information, as many financial institutions use December as a recap of the yearly activity in the account. 
  • If you prepare your own income taxes and your income is $72,000 or less for 2020, you can use the IRS Free File program which is available through irs.gov. 
  • Also, there are free file fillable forms which can be accessed to file returns either by mail or online on irs.gov. 
  • The IRS offers an online interactive tax assistant which helps to answer general tax questions, including what income is taxable, how to handle life events and credits and deductions.
  • If you prefer to have someone prepare your income taxes for you, the IRS has resources available to help you find a qualified preparer.  On irs.gov, you can access the publication of Choosing a Tax Professional or a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.  My best advice is to make certain that the person you select has the proper credentialing to prepare taxes.  You won’t do yourself any favors if the preparer you select does not have the proper knowledge to address your income tax needs.  (And, just because someone claims to know income taxes does not mean they have the background and knowledge.)
  • Lucky enough to get a refund? You can check the status of your refund using the Where’s My Refund? tool on irs.gov.  This is available approximately 24 hours after an electronic filing or four weeks after paper filing.
  • The fastest way to get your refund is via direct deposit into a financial account.  If you don’t have a financial account, visit the FDIC website for information on opening an account. 

For more information about planning ahead, see Publication 5348, Get Ready to File, and Publication 5349, Year-Round Tax Planning is for Everyone.

Good luck!  Happy New Year!

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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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