Are dollars, documents and deductions on your mind this month? Even if you trust your tax preparation to a professional, here are some tips that are particularly relevant given the changes that have taken place over the past year. Perhaps some of them are pertinent to you.
- You get an extra month: May 17, 2021, is the new deadline to file your 2020 federal income taxes. "This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic," said IRS Commissioner Chuck Rettig in a news release. "Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds."
- But the deadline for your 2020 state income tax filing may not be the same as the 2020 federal income tax filing deadlines. Check with your state on your exact deadline. For example, Hawaii has a deadline of April 20.
- May 17 is also the new deadline to make 2020 contributions to Roth IRAs, traditional IRAs and health savings accounts (HSAs).
- April 15 continues to be the deadline for making 2021 estimated tax payments for the first quarter of the year.
- If your 2020 income is much lower than 2019 or you've had a child, consider filing your federal income taxes sooner rather than later. Stimulus payments and tax benefits related to the American Rescue Plan (ARP) are based on your most recent return. So, if your 2020 situation is (much) different from 2019, you may be eligible for new benefits.
- If your 2020 income is much higher than 2019 you may want to wait to file your federal taxes until you have your stimulus payment in hand.
- If your 2020 Adjusted Gross Income (AGI) is less than $150,000 and you received unemployment compensation last year, the first $10,200 of your benefit is not taxable on the federal level.
- Even if you take the standard deduction, the 2020 CARES Act allows you to take an above-the-line deduction of $300 for a cash donation to a public charity.
- When collecting details for your income tax return, remember any income you made on the side. While not all money you receive (like gifts of $15,000 or less) is taxable, some often-overlooked side income that does need to be reported includes canceled debt and cash from side gigs.
- Remember the critical "DCDs": Dependents, Credits and Deductions! The IRS defines dependents as "qualifying child" or "qualifying relative." For help determining who qualifies as a dependent, the IRS has an interactive questionnaire. Depending on the type of support you provide these individuals, different credits and deductions may be relevant, especially following the passage of the ARP.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
-
How to Invest as the AI Industry Grows UpHere’s where to find the winners as artificial intelligence transitions from an emerging technology to an adolescent one.
-
I’m 62 and worried about Social Security’s future. Should I take it early?A Social Security shortfall may be coming soon. We ask financial experts for guidance.
-
How Much Income Can You Get From an Annuity? An Annuities Expert Gets SpecificHere's a detailed look at income annuities and the factors that determine your payout now and in the future.
-
Your Paycheck Stops in Retirement, But Your Life Doesn't: An Expert Guide to Planning for a Confident FutureSocial Security will replace only about 40% of your salary, on average. A solid financial plan will help you plug the gap so you can rest easy in retirement.
-
Are You Jeopardizing Your Future to Help Your Adult Kids? An Expert Guide for How to Not Do ThatIf your adult child needs financial help, of course you want to provide it, but crafting a plan that also protects your financial and emotional well-being is vital.
-
Ask the Editor, July 17: Tax Questions on the New Tax LawAsk the Editor In this week's Ask the Editor Q&A, we answer tax questions from readers on the new tax law.
-
I'm a Financial Planner: Here Are Some Long-Term Care Insurance Tips for Every AgeStrategies include adding riders to life insurance for younger individuals and considering hybrid or traditional long-term care policies for those in their mid-50s and 60s.
-
Engineering Reliable Retirement Income in 2025: An Expert GuideFor dependable income, consider using a bucket strategy and annuities in tandem to promote structure, flexibility and peace of mind.
-
Crazy Markets Shouldn't Derail Your Retirement if You Follow This Financial Pro's PlanBeing nervous about retiring in a volatile market is a red flag that you're relying too heavily on your investment portfolio, rather than a comprehensive plan.
-
Key to Financial Peace of Mind: Think 'What's Next?' Rather Than 'What If?'Even if you've hit your magic number for retirement, it's hard to stop worrying about money. Giving it a clear purpose is one way to reduce financial anxiety.
