With April 15th quickly approaching, everyone is trying to get everything together they need to file their taxes. This tax filing season is like no other; 2020 had so many effects and changes that impact tax returns. Whether you had changes in working in office or remote or changes in employment, you will have to file differently than previous years. Keep reading for tips on how to best file your taxes this year.
Organize your Paperwork
Having a checklist of all the paperwork you need to properly file your tax return for this year can cut down a lot of time and stress involved in filing. You will need last year's tax return, W-2s, 1099s, mortgage income statements, and any other qualifying expenses paperwork. You will also need the prices you paid for stocks you have sold and know the income from your rental properties.
If you received unemployment benefits in 2020 due to changes in your employment from the Coronavirus pandemic, you will have to report the benefits you received as income. When receiving unemployment benefits, there is an option to have taxes taken out. If an employer filed on your behalf, you may not have been able to choose. You may have to make payments to the IRS if your unemployment benefits were not taxed.
If you have been working remotely for most of the past year, you may have to file multiple state income tax returns. Normally, a person files a return in their state of residence and where they work. If a person moved to a place other than their primary residence and worked remotely from this other location, they may have to file multiple state returns. There are different rules for every state, so be sure to do research on the state’s department of revenue website.
Many people qualified for the stimulus checks, including the $1,200 sent through the CARES Act and the $600 through the most recent laws passed. These stimulus do not count as taxable income so they do not need to be reported on your tax return.
Just because we are in 2021, does not mean you cannot add more to your 2020 retirement contribution. The deadline for contributing to a traditional and Roth IRA is April 15th. If you make a deductible contribution, it could help lower your tax bill on your return.
Itemizing your Return
While itemizing your deduction is more time consuming, it can be worth it to save a decent amount of money on the taxes you owe. Itemizing can be extremely beneficial for those who are self employed, home owners, or live in high-tax areas. If your qualified expenses add up to more than the standard deduction amounts, it is worth it to itemize.
Tax season can be hectic but being organized and timely can take the stress out of filing. Talking to a tax advisor can help calm your nerves about all the changes that have been made to this year’s tax returns.