May 15th is quickly approaching so it is time to file your 2020 tax return! The Coronavirus pandemic and legislature has caused many changes to happen to the tax code. It is extremely important to start your filing process early so you have the time to check out the differences for your 2020 tax return. Luckily, Tax Day has stayed the same! May 15th is the deadline for your 2020 tax return to be filed. Keep reading for 5 tips you need for this tax season!
Organize your Tax Documents and file your taxes early
The best way to ensure you are prepared to file is to have all the proper documents compiled together. You will need the social security numbers for yourself, your spouse, and dependents, previous federal and state tax returns, bank statements, mortgage interest, W-2’s, 1099 forms, charitable donations, and any other information for deductions you qualify for. The IRS is planning delays on tax returns, so the earlier you file, the quicker you will receive a refund. If you owe money, you will have a longer amount of time to save up for your payment. Filing early can protect you from identity theft by not leaving much time for someone to file on your behalf.
Unemployment Benefits are taxable, stimulus checks are not
If you received unemployment benefits during the Coronavirus pandemic, you must report that amount on your tax return. Before receiving the unemployment benefits, you may have had the option to have taxes already deducted. You should receive a 1099-G form to assist you in filing. If you received both the Stage 1 and Stage 2 stimulus checks, you do not have to report that money since it is non-taxable.
Look at the charitable deductions for 2020
You are now able to write-off $300 of cash gifts to charities as a charitable donation deduction per tax return. This deduction is “above the line,” meaning if you take the standard deduction you are able to apply this charitable deduction.
Max out your IRA contributions
You are allowed to make 2020 contributions to your IRA through April 15th of 2021 and can be deducted if you are eligible. The contribution limit is $6,000 for 2020, plus another $1,000 if you are over the age of 50.
Max out your Health Savings Account
The money you contribute to a health savings account is pretax, grows in the account tax-free, and can be used tax-free if it is used for healthcare expenses. Contributing to a health savings account provides this triple tax benefit. You are allowed to make contributions through April 15th, 2021 that can be listed on your tax return. The contribution limit for 2020 is $3,550 for an individual, $7,100 for a family, and an extra $1,000 if you are 55 or older.
With all the changes made to the tax code, you want to be on top of your tax return this year. You will also want to make sure you save as much money on your taxes as possible.
Sources:
https://www.principal.com/individuals/build-your-knowledge/tax-prep-5-things-you-can-do-right-now