Tax Preparation Tips for 2021 (Part One)

This might be one of the most unique tax seasons we will ever see in our lifetime, so we want to make sure you're prepared. Here are ten tips to help prepare you for your 2020 taxes! 

Hello to all of our readers here in Goose Creek and beyond! All of us here at Hoods hope that you had a wonderful holiday season and that you're ready for tax season to begin. The IRS has announced that the nation's tax season will start on Friday, February 12, 2021. They will begin accepting and processing your 2020 tax year returns. After the tumultuous year that 2020 was, and the difficulties that are still with us, one thing we want to make sure of is that you're prepared for this current tax season. This might be the most unique tax season any of us will experience in our lifetime, but we want to make sure it is as pain-free as possible.

First and foremost, if you are overwhelmed and would like to work with a professional tax company, we will be happy to work with you! However, make sure to sign up for our services as quickly as possible before we run out of time and space to help you file your taxes on time. Remember, the sooner you file, the faster your tax return will be in your pocket! For those who didn't receive their $1,200 or $600 stimulus checks, make sure to include this in your tax paperwork to receive these funds as quickly as possible. With so many individuals still struggling with financial issues, we want to help get all of your money to you as quickly as possible. With all of that being said, we wanted to create a checklist filled with important suggestions to prepare you for doing your taxes. Our goal is to eliminate any stress, worry, and fear with this list!  

• While we ended 2020 with tips on how to financially wrap up your new year and ways to potentially save money come this current tax season, we are going to take you to the next step. We need to prep for what's coming, and this should not be a painful or stressful process. One way to prepare and help cut down on costs is to make a last-minute estimate tax payment. Paying the IRS before even filing? Yes, this is a thing! It is a possibility that throughout the year you didn't pay enough to the IRS, which could create a huge tax bill for you and you might also be owing penalties and interest already due to not paying enough. If you can pay a little to the IRS right now, you can cut down on the huge chunk payment coming your way in April, and you can budget to pay what you'll ultimately end up owing. Make sure not to overpay though, it is better to owe a few dollars than expect the IRS to send it back in a refund. According to the IRS, to avoid an underpayment penalty, you have to pay 100% of the previous year's tax liability or 90% of the current year's taxes. If you make an estimated payment by January 15th, you can erase the penalities you had for the 4th quarter of your taxable year. Making an early payment can help you in the future. 
• Always make sure to have all of your paperwork printed out, organized, and accessible before you sit down to do your taxes or work with a tax professional. You will need last year's tax return, all of your W2's and 1099's for 2020, all the receipts you're planning on using for write-offs, and more. One of the best ways to organize and make sure you have all the correct paperwork that you need is to print off a checklist to help you gather everything you need.
• Handle your mail very carefully this time of year. Tax documents have or will start to arrive very soon, and it is easy to mistake them for junk mail or a bill that you already paid online. Make sure to not throw away any tax-related documents! Contacting multiple companies to get another copy of your tax documents can take weeks this time of year, and can delay your tax preparation as you work to send your taxes off.
• Make sure all of your tax paperwork is organized and grouped in similar piles for easy access and to go through your tax documents more efficiently. Make sure to spend a good amount of time organizing your yearly receipts for your write-offs. Utilizing paperclips and folders in this process can help you save time and frustration! 
• While this tip might not be directly related to filing this year, attention still needs to be paid. As we saw and discussed last year, tax and stimulus scams and frauds are now at an all-time high. During tax season and with the release of the most recent stimulus check, scams and frauds are at their peak season right now, and you need to be on high alert with these delicate situations. You might begin receiving phone calls, texts, emails, and even letters in the mail from someone posing to be the IRS. Believe us, these scams and frauds are looking more believable by the day, so you need to be extra careful. The IRS nor the U.S Treasury department will ever call or text you. Don't respond to these emails or phone calls you're receiving. Remember, when it comes to money, these criminals know how to use fear tactics to their advantage. The mail is the only way the IRS is going to reach out to you, so please take caution. 
• For all of our readers who are over 70, please begin to consider and think about your RMDs, or your required minimum distributions. While you might have been enjoying sitting back and watching your IRA or 401(k) grow as you contributed to it every year, now that you're 70, things are going to be a little different. The IRS wants its share once you turn 70 1/2. Make sure that you take out your required RMD amount every year before the 31st of December, or you'll be facing a tax penalty of 50% of what your RMD amount is! If you didn't do this by the cut-off date of December 31, 2020, you will more than likely see a penalty on your taxes this year. The more you know now about how to handle this, it will help make sure you don't make the same mistakes next year. 
• We will put this tip on repeat because it is so very important. We all worked from home in 2020 more than ever, if not for the very first time. Do not skip out on writing off your home office tax deductions. However, you must be vigilant in this. You can't just write off anything and everything that you want to, the IRS is very smart and particular about this! Every space and everything you write off must have exclusively been used for business only and nothing else! Based on the square footage of your office to the total size of your home, you can write off a portion of the expense of your home like rent, insurance, utilities, and even housekeeping! 
• Please do not put preparing, doing, and filing your taxes off until the last minute. Rushing through your taxes will result in stress, mistakes, and potentially leading to getting your taxes in late. Mistakes and getting your taxes in late will lead to penalty charges, which will lead to owing the IRS even more money. This will also lead to your tax return taking longer to get into your pocket. 
• Please make the decision sooner rather than later if you need help with doing your taxes or not. There is no shame or harm in admitting this or working with a tax professional. Please do yourself the favor of filing and paying on time.
• If you decide to not work with us at Hoods or with another tax professional, we do urge you to file electronically. This will help you file quicker, it is a much easier process, it will help guarantee that you don't make any mistakes or forget anything, and you might even have the option to pay electronically with a credit card or debit card so you don't have to worry about sending a check off to the IRS. 
• The February 12th start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.
• To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need. 
• You can file your tax returns immediately with Hoods Tax and Accounting Service. We can prepare the returns now so you are in a queue for transmission to the IRS on February 12th. Contact us today. 843-797-5153

As we said, tax season takes preparation and that is no joke! It takes time and dedication, but it is well worth it. Over the next few months, our blogs are going to be dedicated to tax preparation and things you should know about doing your 2020 takes. Make sure you stick around and keep checking back in with us throughout tax season and beyond! Remember, if you are looking for the best accounting services in Goose Creek, the best tax preparation in Goose Creek, business consulting in Goose Creek, bookkeeping in Goose Creek, or payroll services in Goose Creek, we are here for you! Our phone lines and inboxes are waiting for you. Don't hesitate! Please stay safe, everyone. We will see you soon!

To help you prepare for this tax season to the fullest extent, we have also included a few helpful links for you to enjoy and use below! 

• Corona Virus Tax Information: https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments
• Where to report a tax scam or fraud to the IRS: https://www.usa.gov/stop-scams-frauds#:~:text=Call%201%2D800%2D269%2D,%2D800%2D366%2D4484.

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