Some Important Things You Should Do Before the Tax Year Ends
December 31 is rapidly approaching. Here are some things you should do now to prepare for filing your 2021 taxes:
Donate to Charity
You may be able to deduct donations to tax-exempt organizations on your tax return. If you are still trying to decide where to make your donations, the Tax Exempt Organization Search tool on IRS.gov allows users to search for charities. It provides information about an organization’s federal tax status and filings.
The law now permits you to claim a limited deduction on your 2021 federal income tax returns for cash contributions you made to certain qualifying charitable organizations even if you don’t itemize your deductions. Taxpayers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions to qualifying charities during 2021. The maximum deduction is $600 for married individuals filing joint returns.
Most cash donations made to charity qualify for the deduction. However, there are some exceptions. Cash contributions include those made by check, credit card, or debit card as well as unreimbursed out-of-pocket expenses in connection with volunteer services to a qualifying charitable organization.
Check Individual Taxpayer Identification Number
An ITIN only needs to be renewed if it has expired and is needed on a U.S. federal tax return.
If an Individual Taxpayer Identification Number was not included on a U.S. federal tax return at least once for tax years 2018, 2019, and 2020, the ITIN will expire on Dec. 31, 2021.
As a reminder, ITINs with middle digits 70 through 88 have expired. In addition, ITINs with middle digits 90 through 99, if assigned before 2013, have expired. Individuals who previously submitted a renewal application that was approved do not need to renew again.
Find Information About Retirement Plans
End-of-year tax information about retirement plans is available on IRS.gov. This includes resources for individuals about retirement planning, contributions, and withdrawals.
Contribute Salary Deferral
You can make a salary deferral to a retirement plan. This helps maximize the tax credit available for eligible contributions. You should make sure your total salary deferral contributions do not exceed the $19,500 limit for 2021.
Get Banked and Set Up Direct Deposit
Direct deposit gives you access to your refund faster than a paper check. Those without a bank account can learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool.
Veterans should see the Veterans Benefits Banking Program for access to financial services at participating banks.
Think About Tax Refunds
You should not expect to get a refund by a certain date. This is especially true if you plan to use your refund to make major purchases or pay bills. Just as each tax return is unique to the individual, so is each taxpayer’s refund.
A Final Note
Take steps now to Get Ready to file your federal tax return in 2022. Stay connected with your local tax professional through social media, website, newsletters, etc. for up-to-date information to help prepare for filing your federal income taxes. If you have questions, contact your tax professional directly.
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