Important Tax Tips You Need To Remember
We received a little gift in that the deadline for our 2020 income tax returns was extended until May 17, 2021. While that extension may have allowed us to breathe a sigh of relief, one should not delay preparing and filing their returns. The extra month will come and go before we know it.
If you have filed your return, congratulations. For those who haven’t yet filed, here are some important things to remember:
Deadlines are just that – a DEADLINE. Individuals have a slight reprieve this year, but don’t get comfortable. If your return is not filed by May 17, 2021, be prepared for penalties – penalties for failure to timely file, penalties for failure to timely pay your tax – and interest on any unpaid taxes. These penalties and interest add-ons could result in a significant increase to your tax obligation. The failure to file penalty could reach a maximum of 25 percent of unpaid taxes. Penalties for late payment could reach 6 percent per annum.
If you can’t file your taxes by May 17, 2021, file for an extension. That can give you a five month extension until October 15, 2021 and could save you the late filing penalties.
If you owe taxes, you can pay by credit card or check. If paying by check, make certain that your social security number is on the check along with a notation of Form 1040 and the year to ensure proper crediting to your account.
Keep in mind that the stimulus checks you may have received during these COVID times are not taxable as they are not considered income.
If you received unemployment benefits, they are not taxable for federal purposes.
Did you make charitable contributions last year but can’t itemize deductions? This year, you can deduct up to $300 in cash contributions made to qualified charities during 2020 directly on your Form 1040. Bear in mind that this is a maximum deduction per household, not per taxpayer.
If you are age 65 or older, you can take advantage of a larger standard deduction based upon your filing status, age and blindness. This could increase the deduction by $1,300, $1,650 or even double those amounts depending upon your qualifiers.
These are but a few important tips to keep in mind when thinking taxes. Happy filing! (And don’t wait until May – do it sooner rather than later!)
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