A guide to 2021 tax law changes and tax preparation…
The Internal Revenue Service has extended the deadline for filing your 2020 tax returns to May 17, 2021. If you believe you will miss that deadline, you should consider filing for an extension.
Here’s a quick summary of the major changes for 2020: 1,2
- Each of the tax brackets will see an increase
- The deduction limit restrictions will increase for traditional IRAs
- A rise in income limits for Roth IRA contributions
- Contribution limits increase for employer-sponsored plans
- A rise in standard deductions for every filing status
- A rise in limits for HSA contributions
- A rise in estate tax exemption limits
- No required minimum distributions (RMDs) for 2020
How To Prepare
In addition to the tax deadline for tax year 2019 being adjusted to account for issues related to the COVID-19 pandemic, the IRS has announced that filing dates in 2021 have also been changed, from April 15th to May 17th.
There are a few reasons why you may want to consider preparing early:
- Your home, job, or relationships have changed in 2020
- You need to start saving money if you think you may owe taxes
- You want to ensure you qualify for tax deductions
You can make changes throughout the year to help ensure your tax preparations go smoothly. Specifically, you can make periodic assessments of your paycheck withholdings, so that you’ll get a refund or reduce or eliminate your tax burden.
You should keep track of and store your tax and other financial records to avoid delays or frantic preparations as the filing deadline approaches. Such records may include W-2 forms, canceled checks, certain receipts, and previous year returns.
As tax time approaches, you may want the help of your financial advisor to begin preparing early to avoid unforeseen challenges. Our advisors are available to help you get your finances in order in preparation for filing your taxes. CONTACT US today to speak with us about your tax strategy.
1. Yahoo! Finance, January 9, 2021
2. Yahoo! Finance, December 30, 2020