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Autumn is “spring cleaning” for tax professionals. It’s a time to dust off those books and take a close look at what still needs to be done to prepare for the upcoming year. Now, if you’ve been diligent throughout the year with your housekeeping, then the spring cleaning is not quite as daunting! But it is still important to tidy things up a bit before it’s too late.
Here are few suggestions to be sure you’re prepared for the upcoming tax season:
Know the deadlines. The IRS typically begins accepting tax returns in mid-January, but employers (for example) have until January 31st to mail your W-2. Partnerships and S Corporations are required to issue K-1’s by the due date of the entity’s tax return - for calendar year businesses, this is not until March 15 (or September 15 if the entity chooses to file an extension). Personal tax returns are due April 15, unless you file an extension to October 15 (remember, though, even if you file an extension the tax is still due on April 15 or you may incur interest and penalties).
Review current year vs. previous year tax return. Consider any changes that might impact your personal and/or business tax return. This year in particular, consider changes as a result of COVID-19 if applicable.
Any new or lost sources of income?
Purchased or sold a home?
Telecommuted for an employer?
Performed freelance/contract work?
Collected unemployment? (taxable income)
Stimulus payment - “advance refundable tax credit” on 2020 tax return” (nontaxable)
As an employer, did you have employees working from home in a different state?
Received Payroll Protection Program or other grant funds?
Consider tax savings actions.
Make charitable contributions before December 31 - new tax deduction for up to $300 in 2020, even if you don’t itemize on Schedule A
Pay back retirement fund distributions (over three years) due to COVID
Convert an IRA/401k to a Roth IRA
Contribute to a Health Savings Account (HSA) by April 15, 2021
Re-contribute your required minimum contribution (RMD) before August 31
Contribute to your traditional IRA by April 15, 2021
Consult with your tax advisor. Discuss all of the items above with your tax advisor who can provide additional guidance and suggestions specific to your tax situation.
Start collecting your tax documents. It’s never too early to start putting those tax documents into a physical or virtual folder. As soon as you start receiving your W-2s, 1099s, etc., keep them together and ready for your tax return. Compare what you’ve received this year to what you received last year to help determine if anything is missing.
If you have any questions feel free to reach out to the Handle It team at info@handle.it