 As we enter January and start thinking about tax day 2021, our team would like to wish our readers a very Happy New Year! As you return to work this week and start putting away your holiday decor, we know that the last thing you want to think about is your taxes. We also know that our excitement for tax day is probably not that relatable! But here’s the thing: we do this for a living, and we love it. We want to use our enthusiasm and encourage you to get an early start on your taxes this year. If you’ve ever waited until the last minute on April 15th to start organizing your receipts, then you know that panicked feeling. Aside from the stress, procrastinating on your taxes can cost you money. You may forget about — or not have time to research — deductions or credits that could save you big bucks! So, is it too early to start thinking about tax day 2021? We think not, and here’s why. Tax Day 2021 is Only 98 Days Away!Is that all?! Ninety-eight days might seem like a long time, but that’s just over three months. At the rate time seems to fly by, April will be on our doorsteps before we know it. For most, three months to coordinate your taxes is plenty of time. But for those with a more complicated tax situation, you may need that time to get your paperwork in order. Complicated Tax Situations and Tax SystemIf you’re a single filer with one income and no dependents, no big purchases, and nothing out of the ordinary, then you’re tax filing is fairly simple. But add any of the following to that list, and you complicate things just enough to require more preparation:
This list is non-exhaustive, as there are plenty of other situations that can make your taxes complicated. But, sometimes, that isn’t a bad thing. If you have children or dependents, then that’s a tax break (i.e., money). Some of the above allow you to take advantage of tax credits or tax deductions. But, most importantly, it’s our tax system that makes filing complicated. In the United States, we conduct our social policy and tax expenditures through annual tax per household (not individual). This distinction alone makes our system more complicated than in some other countries. Further, individuals (families) must file the paperwork themselves, not their employers. If done incorrectly, you can either lose money or receive a fine. For these reasons, even lower-income earners opt for professional help come tax day. Finding the Best CPAAnother reason to anticipate tax day 2021 is to snag a good, trustworthy CPA. Whether you choose online or in-person, you want to start shopping around early. If you wait until April, most high-quality accountants will be too busy to squeeze you in. Luckily, it’s 2021, and finding a CPA is easier than it’s ever been! For example, our firm is in Pennsylvania, but we serve clients from across the country and even some foreign expats. Many other brick-and-mortar CPAs do the same. You don’t have to stick to your neighborhood — you can take your CPA search nationwide. If you rely on TurboTax and H&R Block programs, starting your taxes earlier allows you to shop around for competitive prices. A long time ago, we pledged to offer quality services that fit any budget. That’s why we match TurboTax’s Deluxe package price. So for the same cost, you can get real people attuned to your specific needs. Give us a shout if you have any questions! What Paperwork do You Need for Tax Day?When a client presents a stack of paperwork, we get excited about it. To us, the pile is a puzzle, and we’re eager to put it together and find the best credits and deductions for your situation. This takes time. There are many details to consider before getting started, and remember that your case is unique to you, so you need someone who can help you. Personal InformationTo start, gather all the paperwork you need for your personal information. This data includes:
This set of important information is easy to collect. You probably know most of it by heart, but it’s smart to have it handy as you prepare for your taxes. IncomeIncome is a huge category with a lot of moving parts because everyone’s situation is different. The earlier you can start gathering this information, the better. Remember, your employer likely provides this information, so you may not have it by now. You still have 98 days, so don’t worry if you’re waiting on any tax forms!
Credits & DeductionsTax deductions and tax credits are different, and it’s essential to understand that. At our firm, we work with clients filing with the MCC tax credit certificate program. Tax credits help you receive more money on your refund, while deductions reduce the overall amount of income on which the government can tax you. So a credit gives you money, and a deduction reduces what you owe. The MCC tax credit is for first-time homeowners and can issue up to $2,000 annually. The savings depends on a percentage of how much interest you pay on your mortgage, and it varies from state-to-state. On average, new homeowners earn anywhere from 10% to 50% of that interest. With most tax credits, you need to file additional paperwork. To benefit from deductions and credits, starting early and using a knowledgeable accountant is wise. Let’s look at some of the most common spending categories for credits and deductions.
If you spent money within any of the categories above, you could file for deductions that lower your income amount or receive credits. In turn, you save money. Deductions and credits are where that aforementioned social policy comes into play. You may have to pay for childcare upfront, but you can usually deduct those expenses on your annual taxes. In ConclusionSo, for all the reasons mentioned above, you should start thinking about tax day 2021! Yes, three months is a long time, but considering all the moving parts that can impact your filings, getting a handle on things now will help you before April 15th arrives. We live and breathe these next few months and love helping our clients save the most money on their taxes.
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AuthorRandy Tarpey CPA Archives
March 2021
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