StockBIZ It’s tax time again: File early. File smart.
by Mary Jo David
Last year, due to the onset of COVID-19, the government extended the usual April deadline to July for filing taxes. No such luck this year—at least not so far. As of the writing of this column, the IRS expects Americans to file their 2020 taxes by April 15, 2021.
How early can you file?
According to Forbes.com, “The Internal Revenue Service (IRS) has announced that tax season will open on Friday, February 12, 2021…The IRS will begin accepting paper and electronic tax returns that day.”
While this writer knows no one who enjoys filing taxes, it can pay to file them early. Sure, those expecting a refund can benefit from an earlier refund if they file early. But what about those who owe? According to Intuit’s TurboTax website, filing your taxes early can also benefit you if you owe taxes, so you can plan for how to make the payment. Remember, filing in February doesn’t mean you have to pay what you owe in February; you still have until the filing deadline to pay.
There’s another reason to file early, one that’s not as obvious as those already mentioned: Filing early can reduce the chance of someone fraudulently filing a return in your name, pocketing your refund, and getting away with it. If the fraudulent return is filed before your legitimate return is filed, it’s your legitimate return that the IRS is going to kick back, and it can take months to sort out the problem. According to TurboTax, “This scam occurs early in the tax season, well before most taxpayers file. Take every possible precaution to keep your SSN secret, and if possible, file your taxes early.”
Steer clear of errors when filing
This year, like last year, Cherie Van Blaircum of CTS-Tax LLC in Gregory was the only tax advisor to reply to my inquiries for advice I can publish to help Stockbridge area residents prepare for the upcoming tax season. Once again, she has provided excellent advice. For example, when it comes to avoiding filing mistakes, Van Blaircum shared this:
“From my perspective the most common mistake people make when preparing/filing their taxes is not utilizing free resources available to them.”
Van Blaircum mentioned that people who do not make over $72,000 in a year may file their taxes for free using the IRS website. “Tax preparation firms are supposed to let tax payers know when they qualify to free file (Federal taxes only), but we get so busy we sometimes forget to let the taxpayer know.”
Van Blaircum is a huge proponent of e-filing, which she believes is safer and more accurate. Following are some useful reminders she shared for filing personal, nonbusiness income tax returns for 2020. Keep these in mind if doing your own taxes. If you’re taking them to a tax preparer, double-check to make sure these things are taken into consideration:
- This year you are allowed to deduct up to $300 in cash charitable donations to 501c3 exempt organizations, even if you don’t itemize. Of course, you need to have proof of the donation in the form of cancelled checks, receipts etc.
- If you are an independent contractor working from home, you can deduct office expenses. However, employees working from home (like so many of us are during this pandemic) cannot use this deduction.
- The new age for taking the required minimum distribution (RMD) is 72. Also, RMDs on IRAs and 401ks were waived for 2020. If you wanted your RMD, it’s likely you had to call the investment company to have it sent to you.
- Due to COVID-19, unemployment benefits were given a boost from the Federal Government in the form of an extension and the $600 and $300 benefit increase. Hopefully, taxpayers remembered to have taxes taken out of the payment,” Van Blaircum said, “Otherwise they may be in for a surprise, come tax time.”
- Unemployed workers who stand to benefit from the Earned Income Credit are being allowed a one-time look back that allows them to use last year’s income if that will help them to qualify. Van Blaircum pointed out that this is a very recent change, and if using a tax preparer, you may need to remind him/her about this.
- Also related to COVID-19, when preparing your taxes or meeting with a preparer, remember to have on hand the record of how much Economic Stimulus money you received in 2020.
According to Forbes.com, last year’s average tax refund was more than $2,500. Regardless of whether you’re savvy enough to do your own taxes or you rely on a professional tax preparer, hopefully you’ll be counted among the lucky ones who receive a 2020 tax refund. Good luck!
Sources:
CTS-Tax LLC, 140 Main St., in Gregory. Ph: 734-498-3476. Email: Cherie.VanBlaircum@cts-tax.com
turbotax.intuit.com/tax-tips/general/reasons-to-file-taxes-early/L8MfjPPjg
Photo credit: irs.gov/pub/irs-pdf/f1040.pdf
