Tax Tips For The Year

Posted by Richard on January 7, 2021

January can be misunderstood when it comes to taxes: You can do a lot more than wait for 1099s and W-2s. There’s even time to make adjustments to your 2020 numbers.
With a little planning, you can position yourself to be super organized and maybe even snag some late deductions. Consider these tips from TurboTax and others:
*Get your paperwork together. A tax checklist can help immensely–your CPA can provide one or you can find one online. Gather records and receipts and find your forms. A little time spent organizing now will help things move faster later.
*Itemize your tax deductions. January is a good time to scrutinize this list before you feel a deadline crunch. If you are self-employed, own a home or live in a high-tax area, you might find that you’ll save a lot by itemizing rather than taking the standard deduction. TurboTax says itemizing is worth it when your qualified expenses add up to more than $12,400 for most singles and $24,800 for most married couples filing jointly. These include items like mortgage interest, charitable donations and a portion of medical expenses.
*Contribute to retirement accounts. The deadline to contribute to a traditional IRA is April 15. A deductible contribution can help lower your tax bill, but check with your CPA whether yours is deductible or not, and whether it makes sense for you to make a concerted effort. A Roth IRA contribution won’t lower your tax bill but may still be a good financial decision, for example.
*Make an estimated tax payment. You typically have until mid-January to make an estimated tax payment and avoid fourth-quarter penalties.
* Read up on COVID-19 tax impacts. Now’s a good time to check with your CPA and educate yourself on loan forgiveness, deductions, exemptions and the like that will make the 2020 filing a unique one.

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