Tax season has already started. Many people are scrambling to get all of their documents together for their 2021 tax returns.
If you’re one of those people gathering their tax documents, keep in mind some of the following four ways you can save, now, on your 2021 tax returns:
- Contributing to your retirement account, such as an IRA, may reduce your tax bill by reducing your taxable income (depending on your tax bracket). This works especially if you haven’t maxed out on your 2021 IRA contributions. Your tax deduction is determined by your total income and filing status. You or your spouse may be covered by a retirement account at work- which limits your tax deduction. You can contribute to your IRA until April 15, 2022, so you have time! The limits are $6,000 per year for 50 years old and under and $7,000 per year for people over 50 years old.
- Charitable donations: Donations to qualified charities last year may help you save on your 2021 tax returns. Taxpayers who don’t itemize can also benefit. For the tax year 2021, individual taxpayers may deduct up to $300 in contributions to qualified charitable organizations. Married couples filing together can deduct up to $600 in cash donations made to approved charities. Donations must be made by Dec. 31, 2021. This deduction may reduce your taxable income for 2021 and, in turn, lower your federal tax bill.
- Deduct eligible business expenses: Self-employed business owners must keep detailed business expenses. These expenses may include business meals, business travel, legal fees, computer purchases, subscription fees (Microsoft Word, etc.), accounting fees (QuickBooks, etc.), marketing/advertising costs, and other eligible business expenses. Business deductions lower taxable income, which results in a lower tax bill for 2021.
- Earned Income Tax Credit (EITC): this is available for the 2021 tax year dependent on your adjusted gross income (AGI). Income limits vary depending on your filing status, AGI, and the number of dependents. If you qualify for this credit, it may offer significant tax savings.
As you prepare to file your 2021 tax return keep these 4 tax savings tips in mind. Please consult your tax preparer for more information.
AK Burton, PC, knows the current tax laws and how to work with the IRS. Our experienced tax preparers can file your business and personal tax returns and represent you to the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. Covid protocols if requested. We serve the Bethesda, Rockville, and Montgomery County, MD area.
August marks the end of summer and beginning of school. As summer draws to a close don’t forget that the end of summer marks an important tax deadline: Filing 2020 Extended Business Tax Returns.
Business owners that filed a 6 month extension to file their 2020 business tax return Form 1065 or Form 1120S must file by their tax returns by September 15, 2021. ***
If you haven’t filed your 2020 form 1065 or 1120S and don’t know where to start; here are some tips to collect the information to prepare your return:
- Make sure your books are up to date and reconcile your books
- Compile your business bank & credit card statements
- Download your December 2020 loan statement that shows the year-end balance and interest paid
- Compile your payroll tax returns including:
- Quarterly Forms 941
- Form 940
- Quarterly state unemployment returns
- Compile your sales tax returns
- Did you file form(s) 1099? – if so, gather form(s) 1099
- Did you make estimated payments? – if so, make note of the date and amount of each payment.
- Did you make an extension payment? – if so, make note of the date and amount of each payment.
- Vehicle mileage – make note of your:
- Total mileage
- Business mileage
- Do you have a home office which you use exclusively for business? Include:
- Total sq ft of home
- Exclusive Business use sq ft of home
- Expenses (utilities, taxes…etc,)
- Does your business have a retirement plan? If so – gather your December 2020 retirement plan statement
Once you have collected this information, it’s time to file. The deadline to file extended partnership and S-Corporation returns is less than a month away. Not sure about preparing your own return? At A.K. Burton PC, we specialize in tax services for small business owners. We prepare and file forms 1065 and 1120(S).
A.K. Burton, PC, can do all your income tax preparation. We have experienced staff who can prepare and file your tax return and represent you before the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. We serve the Bethesda, Rockville, and Montgomery County, MD area.
*** For more information on filing as a Partnership or an S Corp, consult the IRS website.
The good news is that the IRS gave us an extra month to file our tax returns for 2020. It is May 17, 2021, and not April 15, 2021. ***
The bad news is that it may take a while to receive your tax refund.
It is frustrating, especially if you need the refund to catch up on bills you may have accumulated during the COVID crisis. Here are several ways you can get your tax refund quicker:
- E-File: Submit your tax returns electronically versus mailing your tax return in.
- Confirm that you have all your income documents before you file. You should have all of your 2020 income documents by now, but if you don’t, get them before you file. If you don’t have them and file your return, then you might have to amend your return(s).
- Double-check your mailing address. This one is crucial! The IRS contacts you by mail for required updates on your tax return. Make sure your mailing address is correct so that you will receive all correspondence, (including a refund check), from the IRS.
- Double-check your bank information on your return. If you choose direct deposit to speed up receiving your refund but fail to provide the correct bank account information, then you won’t receive your refund by direct deposit.
- Check all your ID numbers. IRS has every citizen’s name and address on file. Each name has a unique ID number that is tied to the name, birthdate, income amount, and social security number.
- Confirm that you are the only one claiming your dependent(s). If you know someone who could also claim your dependent on their tax return, then verify who will be claiming the dependent(s). If a dependent is claimed by more than one person, then the second tax return to claim them will be rejected by the IRS.
Have a Certified Public Accountant file your tax returns for you. Tax laws are notoriously complicated and change year to year. So, save yourself the stress and fees by hiring a CPA to file your taxes for you. They can file them and represent you before the IRS. What’s not to like?!
As of this blog posting, there are still a few weeks left before the May 17, 2021 posting. Have you done all of the above?
A.K. Burton, PC, can do all your income tax preparation. We have experienced staff who can prepare and file your tax return and represent you before the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. At this time we are not providing in-person services because of the pandemic. We serve the Bethesda, Rockville, and Montgomery County, MD area.
*** See the IRS website for updates on the new tax return due date for 2021.