At the start of the new year it can be easy to forget that tax season is just around the corner. Hopefully, all end of the year planning for 2020 has already been taken care of so you can start to focus on getting everything in order for filing taxes. This year, planning for taxes, and taxes in general, may look a little different with all of the uncertainties that took place in 2020. With Covid factors, unemployment, and working remotely, filing for taxes may take a bit for care and a bit more time to be sure you have everything right. The following helpful tips will get you started on the path for prepping for this upcoming tax season.
Review some of the new tax policies that might impact you, and revisit some older tax policies that may now apply to you when they didn’t previously. One of the newest tax acts that has come out this past year (in response to Covid) is the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. According to an article by EisnerAmper.com, The CARES Act has had some impacts on taxes, including:
- 10% Penalty for early distribution (under age 59½) waived for those who are diagnosed with COVID-19 (including spouse and dependents) or experiencing adverse financial consequences resulting from quarantine, furlough, lay-off, reduction of work, inability to work due to lack of child care, or owner or operation of business forced to reduce hours due to COVID-19
- Changes to certain retirement plan loans applying to those impacted by COVID-19, and
- Changes to deductible charitable contributions in 2020
The same article addresses another recently formed Act, The Setting Every Community Up for Retirement Enhancement (“SECURE”) Act. This act repeals the maximum age for traditional IRA contributions, starting in 2020. An individual at any age may contribute to a traditional IRA as long as compensation is received. For more information on these new acts see the link provided.
Perhaps the most helpful step you can take is seeking advice from a professional. Even if you have successfully completed your taxes on your own in years past, this year is a great time to look into professional tax preparation advisors in your area. These professionals are up to date on the most recent tax laws and are sure to find ways to help you organize your finances and find some helpful policies that you might qualify for. Although this outside help calls for additional payment, even just a consultation visit may help you identify something you missed.
Finally, familiarize yourself with this year’s different tax rates, especially if you have had any bid life events that require new claims (unemployment, new dependants, etc). Be sure to check changes in social security, tax brackets, deductions, rates, and retirement plans you may have in place. For a quick look at some of these items, follow this link to an article from Intuit Accountants Tax Pro Center. They have consolidated many important tax charts and their changes with side by side comparisons of 2020 and 2021 to help plan for this upcoming tax season.
As this tax season follows one of the most unpredictable and “unprecedented” years, it is going to take some extra time, planning, and research to get the most out of your taxes this year. If you are choosing to file for yourself or if you decide to seek the help of a tax professional be sure to organize your financial statements and familiarize yourself with the old and changing policies that will affect you this tax season.