It’s that time of the year when filing your tax return will be top of mind.
The IRS opened its portal for individual tax filers on January 24, 2022. For the 2021 tax year, it is critical to save documentation of Child Tax Credit payments either made or expected, as well as to claim any remaining Economic Impact Payments not received. An accurate tax return can avoid processing and refund delays.
When looking for a reputable accountant, the 6,000-member strong Connecticut Society of CPAs features the Find A CPA area at https://www.ctcpas.org/find-a-cpa. Search criteria can be entered for location, types of services, firm staff size, and specific industry focus for business clients. The web page also features a link to the IRS's Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offering free basic tax return preparation to qualified individuals.
The top 10 things to consider for your 2021 filing:
1) Make your taxes a priority right now. Before you know it the April 18, 2022 deadline will be here. It is important to be organized to ensure a smooth process.
2) Gather income documents, including W-2 forms, 1099 forms (if appropriate), alimony received, sale information, and miscellaneous income.
3) Gather income adjustment documents, including 1098 forms for student loans, tuition and mortgage interest, IRA contributions, energy efficient home improvement receipts, Medical Savings Accounts contributions, self-employed health insurance payments and pension plans, moving expenses, and alimony paid.
4) Gather itemized deductions (if applicable), including childcare costs, education costs, adoption costs, investment interest expenses, charitable donations, and medical and dental expenses.
5) Record all cash donations to charities in 2021 as they are 100% deductible if you itemize. If you do not itemize, individuals can deduct $300 for cash charitable contributions on top of their standard deduction; $600 on a joint return.
6) Gather taxes paid documents, including personal property, real estate, state and local income taxes, vehicle license fees, and estimated taxes paid for self-employed. Subject to a $10,000 cap.
7) Save all letters and/or correspondence sent from the IRS outlining your Child Tax Credit and stimulus payments. You may have one letter or several letters outlining the payments made or expected amounts. Each spouse will receive an individual letter. The total advanced amount is the combined amount. The Child Tax Letter is Form #6419 and the Stimulus Letter is Form #6475. Your accountant may ask you to provide proof of deposit if there are discrepancies. You can also check amounts received on IRS.gov.
8) Remember to maximize your 401k, 403b or other company contributions for 2022 as you plan ahead. Self-employed individual contributions and IRA contributions can still be made for 2021.
9) Consider “bunching” your deductions in preparation for 2022. This will allow you to aggregate or delay discretionary medical expenses and/or charitable deductions.
If you can’t file by April 18, be sure to file an extension with your tax advisor. An extension is an extension of time to file, not pay. The extended file deadline is October 17, 2022.