Spend A Little Time Each Week To Prepare For The April 15, 2021 Filing Deadline
Most of the needed tax records to prepare your tax return will show up in the mail or online in January 2021. Collecting all your tax related documents is important so that we report a complete and accurate return.
The IRS also gets copies of many of these documents and will match your tax return to their records.
Let Us Review What You Should Be Looking For…
– W-2s. Read them carefully. Contact your employer if there is a discrepancy or if you do not receive them by the end of January.
– 1099s. You should receive 1099-INT or 1099-DIV forms for any accounts that pay interest or dividends. Even tax-exempt interest must be reported. IMPORTANT: “Corrected” forms are always a possibility. Be alert for such announcements.
– 1095-A. You would receive a 1095-A if you purchased Health Care through the Health Insurance Marketplace and had part of your premiums offset by the Advance Payments of Premium Tax Credit. This form is needed to calculate the actual Premium Tax Credit for which you would be entitled.
– Other 1099s. Real estate sales are often reported on 1099-S. Stock sales on 1099-B or Consolidated 1099. Pension, 401K and IRA distributions are reported on 1099-R. Pay special attention to forms 1099-A and 1099-C. These report foreclosures and debt consolidations or debt cancellations which may or may not result in taxable income. We need to see them to correctly prepare your return.
– Form 1098. Reports mortgage interest paid to a bank, savings & loan, or credit union. These forms may also report real estate taxes (if payments are escrowed by the lender).
– Other Income. Look for 1099s of state tax refunds, unemployment income, prizes or gambling winnings or rents that you collect. Read each one carefully and keep them with all your other tax documents. Gambling winnings can also be reported on Form W-2G. There will also be new 1099 for self-employed called 1099-NEC.
– Your Records. Review records for possible income or deductions. Add up medical expenses and any taxes paid. If you recall paying a deductible expense but do not have a receipt, jot it down and we will discuss before I prepare your return. Charitable contributions are different – you must have receipts, or your deduction could be challenged and denied! If you are missing a receipt, contact the charity to see if you can get the document(s) needed.
Take extra time to make sure that you have all the necessary facts if any of the following situations applies to you.
- Child Care Expenses. I need the full name, address, telephone number and tax ID number of your care providers, and the total paid per child to each caregiver.
- Estimated Federal Tax Payments. Find the date and amount for payments. April 15, 2020, September 15, 2020, and January 15, 2021. A Federal January 2020 payment would have been claimed on your 2019 return.
- Sales of Property. Most important item is the Final Settlement Statement. Include a list of home improvements in all prior years since purchase.
- College Tuition. Form 1098-T lists tuition paid. These forms are generally available electronically to the student. Make sure that the “student” checks for these forms and gives them to you. I need these forms as well as details on the courses, all education-related expenses
for required equipment and related fees, when each item was paid and who the “student” was.
- Sales of Stock. Form 1099-B shows sale prices. If this form does not show the original purchase information, you will need to provide this.
- Tax Rules On Pass-Through Entities Continue. Schedule K-1 from
partnerships and S-Corps always seem to arrive late. Don’t worry. We can do the rest of your return and be ready to finish when the elusive K-1 arrives.
- Social Security Benefits. Look for Form 1099-SSA. We must report
the gross amount and not just your net monthly benefit. Your Medicare Premiums listed on the form may also show a medical deduction.
- Employees – Last Pay Stub. Your W-2 is critical, but your last pay stub
may reveal tax deductions that do not usually show up anywhere else, such as union dues.
- Special Accounts. Do you contribute to an IRA, Roth IRA or Health Savings Account? These and others can affect your taxes. Make sure I have all 1099s and information on contribution amounts and dates.
- Complex Transactions. Please call if you have a foreclosure, sale or exchange of real estate, casualties such as a natural disaster.
Of Greatest Interest To Most Taxpayers For Tax Year 2020
The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from 2019.
For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 for 2020, up $200,
For heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.
The personal exemption for tax year 2020 remains at $0.
* Annual Gift Limits The annual exclusion for gifts is $15,000 for calendar year 2020, the same as it was for both calendar years 2018 and 2019.
My charitable donations are not deductible unless I itemize my deductions instead of claiming the standard deduction.
The CARES Act, passed earlier this year in response to COVID-19, allows a charitable deduction from
Adjusted Gross Income (AGI) of up to $300 for taxpayers (MFJ, Head of Household or Single) that do not itemize but gave a cash (or check) contribution to a qualified charity, with proper documentation.
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