Take a few simple steps now to make
filing your taxes easier in 2021.
2020 has been a busy year with a lot of changes. To make sure you don’t miss out on tax benefits or make mistakes, you can take a few simple steps now to make filing your taxes easier in 2021.
An important first step to getting taxes ready for the tax filing season is to gather all tax records. Having records organized makes preparing a tax return easier. It may also help discover potentially overlooked deductions or credits. Here are a few steps to take now:
Steps You Can Take Now
- Most income is taxable, so taxpayers should gather income documents such as Forms W-2 from employers, Forms 1099 from banks and other payers, and records of virtual currencies or other income. This also includes unemployment income, refund interest, and income from the gig economy.
- Beginning in 2020, some individuals may receive Form 1099-NEC, Nonemployee Compensation, rather than Form 1099-MISC, Miscellaneous Income. If you performed certain services for and received payments from a business, you may receive Form 1099-NEC. Please refer to the Instructions for Form 1099-MISC and Form 1099-NEC to ensure you are filing the appropriate form.
- You may also need Notice 1444, Economic Impact Payment, which shows how much of a payment you received in 2020. This amount is needed to calculate any Recovery Rebate Credit you may be eligible for when you file your federal income tax return in 2021. If you didn’t receive an Economic Impact Payment in 2020, you may qualify for the Recovery Rebate Credit when you file your 2020 taxes in 2021.
- To see information from the most recently filed tax return, recent payments, and more, you can sign up to view account information
- To avoid delays in tax return processing, you should notify the IRS of address changes and notify the Social Security Administration of a legal name change.
- If you have an Individual Tax Identification Number (ITIN), you should ensure it has not expired before filing a tax return in 2021. For example, ITINs not used on a federal tax return at least once in the last three years will expire on Dec. 31, 2020. If the ITIN has expired, submit Form W-7, Application for IRS Individual Taxpayer Identification Number, now to renew an ITIN. If you fail to renew an ITIN before filing a tax return next year, any refund may be delayed and you may be ineligible for certain tax credits.
Time is running out to use the Tax Withholding Estimator, a tool on IRS.gov designed to help determine the right amount of tax to have withheld from paychecks. You can use the Tax Withholding Estimator to help determine if adjustments to withholding are necessary. Withholding changes can be made by submitting a new Form W-4 to your employer.
If you receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits, and in some instances pension and annuity income, you should make quarterly estimated tax payments. The last payment for 2020 is due on Jan. 15, 2021.
A Final Note
Contact your local tax professional if you have questions about or need assistance with the information needed to file your tax returns in 2021.
As a reminder, remember to be on the lookout for potential scams, including COVID-related scams, in the form of texts, emails, and phone calls. Take a moment to pause and think before responding. The IRS does not make unsolicited phone calls or send unsolicited texts or emails.
Stay safe. Stay well. Stay home.
Bayshore CPA’s, P.A. are your local Certified Public Accountants
and Tax Resolution Specialists conveniently located
in Mooresville, North Carolina
Image: Photo 155879645 © Deskcube – Dreamstime.com