Four Tax Season Strategies
This year, the federal tax filing deadline has been extended to May 17.
It's important to note that state tax deadlines may or may not follow that same timeline. You can find updated state deadline information here.
In the meantime, here are four strategies to keep in mind as you take advantage of the extra time you have to file.
For those who take the standard deduction instead of itemizing, the above-the-line charitable deduction for 2021 was increased to $600 for a married couple filing jointly, whereas, for the 2020 tax year, the deduction was $300 per tax return regardless of filing status. The contribution needs to be made in cash and to an IRS-approved charitable organization.
For those who itemize their deductions, the adjusted gross income limit for cash contributions to qualifying public charities remains suspended for 2021, which means for cash contributions made in 2021, taxpayers can deduct up to 100% of their adjusted gross income (AGI).
The penalty for overstating a charitable deduction has been increased from 20% to 50% of the underpayment, so don't be tempted to fudge the numbers to take advantage of the larger deductions. Keep a receipt for any charitable donation over $250.
The IRS operates on a pay-as-you-go system, which means you are required to pay taxes on income as it is earned throughout the year; otherwise, you may incur penalties. Although the federal income tax deadline has been moved to May 17, 2021, and many states have also moved their income tax filing deadline to May 17, 2021, keep in mind that the date for paying quarterly estimated taxes has not changed from April 15, 2021. A recent tax law change makes the first $10,200 of unemployment income tax-exempt for taxpayers with a modified adjusted gross income of less than $150,000; however, states vary on how they treat unemployment income. If you filed your tax return before the new unemployment income exclusion was enacted, the IRS is advising taxpayers not to file an amended return. Instead, the IRS will recalculate the tax due and refund any overpayment to the taxpayer without any action required by the taxpayer. Economic stimulus payments are considered a tax credit and not income, so they are not subject to income taxes.
If you have questions about taxes and how you should file your returns this year, it's vital that you reach out to your financial team. We're always here to help with any benefits-related questions or concerns as you prepare your taxes. Contact the Robin S. Weingast & Associates team today for assistance.