Mar 01, 2021
With tax filing season in full swing, it is time to look through your tax filing plan for 2021. Here are some ideas:
- Organize your records. Find a place in your house and put all the documents there when you receive them or consider scanning documents to store on your computer. A great way is to take pictures of the documents with your phone as backup. Missing documents - even just one - is a significant reason why filing a tax return is delayed.
- Create an April 15 reminder. It is the deadline for filing your 2020 individual income tax return, completing gift tax returns, making contributions to a Roth or traditional IRA for 2020, and for paying the first installment of 2021 individual estimated taxes.
- Gather your tax information for filing. Items you will need include K-1s, W-2s, 1099s and other forms you receive from your business, employers, brokers, banks, and others. If you detect any errors, contact the sender immediately to request a corrected copy. If you received an Economic Stimulus payment(s), your tax preparer will need a copy of the Notice 1444/letter.
- Know business return deadlines. If you own a business or are in a partnership, the deadline for filing partnership and S corporation returns is March 15. Calendar-year C corporation tax returns are due by April 15. Six-month extensions can be requested for partnerships and corporations.
- Keep great donation records. Cash contributions under $250 require a bank record like a canceled check, credit card record or a receipt from the charity. For larger donations, a receipt from the charity must be obtained before filing your return. Donations of property should include a photo, a receipt from the charity and a detailed listing of the items donated that are in good or better condition.
- Review your child’s income. Your child may be required to file a 2020 income tax return, too. Generally, a 2020 return is required if your child has earned more than $12,400, or has investment income (such as dividends, interest, or capital gains) over $1,100. If your child had both earned and investment income, other thresholds apply.
- Contribute to your IRA. There’s still time to make 2020 IRA contributions — up to April 15, or until you have contributed the maximum allowed. That is the lesser of your earned income for 2020 or $6,000 ($7,000 if you are 50 or older).
- Calculate your estimated tax if you need to extend. If you file an extension, you will still need to do a quick calculation to estimate your 2020 tax liability. If you still owe Uncle Sam any money, you will need to write a check by April 15. Remember, filing an extension gives you additional time to FILE your tax return, but not to PAY the taxes you owe.
As always, should you have any questions or concerns regarding your tax situation please feel free to reach out to the accountants at Terry Lockridge & Dunn. They can be reached in Cedar Rapids at 319-364-2945 or in Iowa City at 319-339-4884.