The 2020 tax season may only be a few months in the rear-view mirror, but it’s not too soon to start looking forward to next year’s return. With the ripple effects of Covid still impacting the economy in the form of tax credits, remote work and more, 2021 is shaping up to be another tricky tax year.
A number of factors will make 2021 tax returns more complicated than average, including the third stimulus payment that started going out in March. Though the stimulus payments aren’t considered taxable income, if taxpayers include them as income they will end up paying more in taxes and will ultimately need to request a refund.
The advance child tax credits will also be something that tens of millions of families will need to be aware of when filing, as it could impact their final return.
Here are two key things you can start doing now so that you are ready when tax day rolls around in 2022.
1. Do a mid-year tax checkup
Do a mid-year tax checkup so that they know how the year is shaking out for you.
Do a projection of what your tax return is going to look like knowing what the rules that changed are, knowing what might apply to you, knowing what’s different from last year,” “A mid-year checkup will help you identify some problem areas or reinforce some comfort.
Regardless of whether you enlist the services of a tax professional or file your taxes on your own. Doing your own research is important because it may result in you finding additional tax credits that you didn’t know you were eligible for.
The IRS isn’t in the business of making sure you’ve got all your credits and all your benefits, They’re in the business of making sure they get all their money.
2. Stay on top of your important documents and information
One of the biggest favors a taxpayer can do themselves is to be diligent about keeping track of all the information they will need for their tax returns, Getting your stimulus numbers, child tax credit information and unemployment benefits together in one place now will streamline your tax process down the line.
People who waited until the last minute the past couple of years really found themselves in an information crunch, It’s only going to be bigger this year because more people are impacted.
Keep track of everything that happened to you this year — whether it be living through a natural disaster or going back to school or starting a new business — so you won’t forget anything come tax season.
Start your list of things that might change your tax return and either learn about them on your own at tax time or tell your tax pro, You cannot give enough attention to the things that happened to you during the pandemic years.
Tax Day is April 15, 2022.