Income Tax Tips for a Smooth Tax Return Filing By Kim Ford
COVID and SNOWVID and Taxes, oh my! Like Dorothy in the Wizard of Oz, we’ve all been through a swirling tornado of new tax laws and rules during these last two years. Here’s a quick rundown of where we’ve been and some tips on how to make this filing season as smooth as possible. Important Dates Due to COVID, the due date for 2019 personal income taxes to be filed was July 15, 2020. After SNOWVID in Texas, we got a reprieve until June 15, 2021 to file our taxes for 2020. As of this writing, we are still on for the April 18, 2022 deadline for 2021 taxes, so what should we do to make this filing season as stress-free as possible? Organization is Key Put time on your calendar to gather all your documents. Look back at your 2020 return to jog your memory concerning your various sources of income and deductions. Government Payments If you received a COVID-19 relief Economic Impact Payment or an advance Child Tax Credit payment, make sure to report the correct amount to avoid processing delays. The IRS sent letters to recipients of the Impact payments and the advance Child Tax Credit payments. If you are unsure about how much was received, you can check for the amount on the website IRS.gov. Charitable Contributions If you don’t itemize your deductions, you can still get some benefit for charitable contributions of up to $600 for joint filers and $300 for single filers. That’s up from $300 for all filers in 2020, so find those receipts for donations to charitable organizations. For 2020 and 2021, the charitable contribution limit for itemizers is 100% of Adjusted Gross Income – up from 60% in 2019 Unemployment Benefits Many people received unemployment benefits in 2021, and they are taxable this year. In 2020 some of the payments were not taxable, so make sure you have the information regarding amounts received and include them in your return. Cryptocurrency There is a revised question on the 1040 that needs to be answered regarding cryptocurrency. It reads, “At any time during 2021, did you receive, sell, exchange, or otherwise
dispose of any financial interest in any virtual currency?”. This must be answered yes or no. If you deal in this area, read the instructions closely for more explanation. Meals & Entertainment In the past, business meals were only 50% deductible, but for 2021 and 2022, that has changed. Those expenditures are 100% deductible for these years, as long as the meal is provided by a restaurant. Entertainment expenses are still not deductible, but if meals are paid separately from the entertainment, those expenses can be deductible. IRS Delays from 2020 Nearly 24 million taxpayers are still waiting for the Internal Revenue Service to process their tax returns from last year, with many refunds being held up for 10 months or more. The backlog will probably further slow service in the 2022 filing season. If you are one of those taxpayers that is waiting on a refund from 2020, know that if it has not been at least 10 months since the return was filed, it’s probably still in the queue unopened. The IRS should pay interest on those late payments once they are processed. To find out the status of your refund, the IRS suggests you go to IRS.gov and click on “Where’s My Refund?”. Best Ways to File Your 2021 Return Due to the backlog with IRS from the 2020 returns that have not been processed, there are some lessons to learn to keep out of the IRS backlog for 2021. - Be as accurate as possible, especially regarding items that are reported to the IRS like W-2’s, 1099’s, Government Payments, etc. This will speed up the process. - File electronically by using IRS authorized software or a professional who has access to software and systems to ensure your return is filed properly with the IRS so that no human has to process it. - Ask for all overpayments to be either applied to the following year’s taxes or directly deposited into your bank account so that the IRS doesn’t have to send you a physical check. Remember at the end of the Wizard of Oz movie when Dorothy woke up in her own bed, surrounded by the people who loved her, and she was ok? By following these tips, you too can make it through the tornado of income tax filing season and live happily ever after!
theKFORDgroup, 8620 N. New Braunfels, Suite 300, San Antonio, Texas 78217 O (210) 393-4784 | F (210) 340-8359 | kford@theKFORDgroup.com | theKFORDgroup.com
March/April 2022 91
