Wednesday, February 3, 2021
Tax season is just about here. We all had plenty of stress and uncertainty last year, so let’s tackle this tax season head-on, and make it as smooth and easy as possible. First & foremost, let’s get organized. As your tax documents begin to arrive in your inbox and your mailbox, keep this comprehensive tax-preparation checklist on hand. The better prepared you are, the sooner you can shake off the stress of taxes and get back to doing what you love instead.
Instead of letting your tax documents pile up on your counter or get lost in your inbox, create an organized system for the following:
If you want your tax-filing experience to be painless, you’ll also want to make sure that you have all of your and your dependents’ personal information available, such as:
Also, if you itemize your deductions, you’ll need records to include your totals and provide proof.
Okay, so that’s the nitty-gritty of what you’ll need in front of you to thoroughly fill out your tax return. But there are also a few things to think about that could impact how you file, such as any changes that have occurred this year. Did you add another child to your family? Did one of your children start college? Did you start taking withdrawals from a retirement account? All of these changes need to be reflected on your tax return but won’t show up on prior returns.
More than personal changes, there may be changes to federal or state tax law that you should be aware of. The Tax Cuts and Jobs Act tax reform bill of 2017 is still being implemented, and the new SECURE Act could also affect your 2020 tax situation.
Specifically, you should stay on top of annual changes to retirement plan contribution limits. For the 2020 tax year, you can put up to $6,000 in any type of IRA. If you are over age 50, that amount goes up to $7,000 thanks to the $1,000 catch-up contribution. Annual contribution limits for 401(k)s, 403(b)s, the federal Thrift Savings Plan, and most 457 plans also increased by $500 for 2020. The new annual limit on contributions is $19,500. If you are 50 or older, your yearly contribution limit goes up to $26,000. And if you are eligible to contribute to an HSA, you can save $3,550 if you have single medical coverage and $7,100 if you are covered under a qualifying family plan. If you are 55 or older, those limits go up another $1,000. Keep in mind that for IRAs and HSAs, you have until April 15th, 2021, to contribute for the 2020 tax year.
A knowledgeable financial professional can help you understand any tax law changes and how they affect you.
Taxes are complicated, so each little step to simplify the process will add up and save you time and money. Let’s take a step beyond this year’s taxes, and look long term. Are you optimizing all of the tools available to you to limit your tax liability? Are there steps that you could take now to minimize future taxes? Do you have a plan for your tax refund that will further your overall financial goals?
Working with an experienced tax professional who understands the unique challenges presented during tax season can help to maximize the opportunities available. Together, we can work toward your overall financial plan and optimize all of the tools available to you to limit your tax liability.
If you want to be proactive about tax planning and you don’t have a trusted advisor yet, we would love to help you experience confidence in every aspect of your financial plan. Call our office today at (402) 932-2141 for your complimentary consultation or email contact@dbretirement.com to get started!
Darrell Bryant, CFS®, CAS® is Omaha’s Retirement Strategist. As the founder of D. Bryant Retirement Strategies, he focuses on helping individuals and couples nearing retirement do so successfully. Along with more than 30 years of experience, he received the Certified Fund Specialist (CFS®) designation and a Certified Annuity Specialist (CAS®) designation from the Institute of Business & Finance. Passionate about helping as many people as possible in his community, he hosts Retirement Strategies Radio, heard Saturday mornings at 7:00 a.m. on 1110 KFAB. He has also written articles on financial planning that have been featured on Fortune.com, FoxBusiness.com, Money.com, and in the Midland Business Journal. To learn more, visit his blog, his website, or connect with him on LinkedIn.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. You should discuss your specific situation with the appropriate professional. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.