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Tax Items To Check as the Year Winds Up

 

It's been a very busy year at the IRS, with many special tax changes. Below is a review of some of the top issues you will want to discuss with your tax preparer as the year draws to a close and again when you meet to prepare your returns.

  • Coronavirus tax relief. You may be eligible for special tax help after this troublesome year. Advance Child Tax Credit payments, for example, have been expanded due to the American Rescue Plan Act for tax year 2021 only. If you receive more tax credit than you can properly claim, you may need to repay the IRS some or all of the excess amount. This may reduce your tax refund or increase your total tax due for 2021.
  • Natural disasters. There may be special tax law provisions to help an individual or a business recover financially from a disaster, especially if you live in a county or city that the federal government has declared a major disaster area.
  • Job loss. Be aware that severance pay and unemployment compensation are taxable, as are payments for any accumulated vacation or sick time. Withdrawals from your pension plan may be taxable. You need to make sure that enough taxes are withheld from these payments or make estimated payments. Job-hunting and moving expenses are no longer deductible.
  • Gig economy. Those who joined the gig economy due to the pandemic will need to consider making estimated tax payments on gig income. Avoid a balance or penalties. Any income from part-time, temporary or side work that was paid in cash, property, goods or virtual currency will have to be reported and likely will be taxed.
  • Life changes. A birth or a marriage can affect your refund or how much you owe. Give your employers a new Form W-4, Employee's Withholding Allowance, promptly. You may move into a higher tax bracket or be affected by Additional Medicare Tax. Keep in mind that if you're married as of December 31, you must file as a married person for the entire fiscal year.

Most Americans pay taxes throughout the year from salary withholding, quarterly estimated tax payments or a combination of both. The IRS says about 70% of taxpayers over-withhold, resulting in a refund. For those people, the average refund was more than $2,700 in 2020.

The bottom line? Take a look at your tax status, and work closely with tax professionals for a smooth end of year and a tax prep that won't lead to unpleasant surprises!

 
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Coulter & Justus, P.C.
Coulter & Justus, PC
(865) 637-4161
9717 Cogdill Rd, Suite 201
Knoxville, TN 37932
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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