In their latest information-packed episode, Tax Directors Candace Varner and Ben Hake prepare you for filing your 2021 tax returns. They cover important documents you’ll need and when you can expect to receive them, along with a few ways you may be able to reduce your tax bill before the filing deadline.
Lastly, if you’ll be waiting on a K-1 (or tend to be a slacker), they explain what you’ll need to know about filing an extension.
Read more about tax documents and deadlines: https://creativeplanning.com/education/article/2021-tax-filing-important-documents-and-deadlines/
Make some new year’s tax resolutions: https://creativeplanning.com/education/article/five-new-years-tax-resolutions/
The Standard Deduction podcast is hosted by Tax Directors Candace Varner and Ben Hake. This podcast is a thoughtful, informed discussion about ideas, trends and developments in taxes related to personal wealth management.
Our mission is to educate and inspire people to make better financial choices through knowledge, tools and strategies. We believe that education and planning are key components of financial success. Come explore relevant financial topics with our team.
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Ben Hake: Hello and welcome to The Standard Deduction. I’m Ben Hake.
Candace Varner: And I’m Candace Varner. Ben, it’s a new year. Are you excited?
Ben: Oh, super excited. It’s the best time of the year.
Candace: Because its tax season?
Ben: No. It’s time to make resolutions, things of that nature.
Candace: Did you make a new year’s resolution this year?
Ben: I’m not sure I’ve made a resolution since my Model U.N. days in middle school, but it’s always the opportunity to make one.
Candace: Wow. I am going to let that one lie just as it is and let you stand on your own with that. Instead, I’m going to turn back to tax season because new year’s means tax season to all tax accountants. And some of you might be begrudgingly starting to think about your tax returns, but we’ve been planning for it for a while. And now it’s time to start the show. We’re going to start getting some mail, probably now, and we’re going to keep getting tax mail, or emails more likely, throughout the next couple of months. So, let’s start with what’s coming right now in the mail. Ben, hit me.
Ben: Yes. So for the last, probably 24 months, the IRS has been sending out more money unrelated to tax refunds than they ever have in the past. And so as an effort to make sure… They probably assume not every taxpayer’s tracking this. So they’re sending quite a bit of information that’s just the summary of what you’ve received during the year. So one of the ones that I would guess almost all of our listeners will have received is the advanced Child Tax Credit letter. So, back in July, the IRS started basically sending early payments of that. And that’s one of the new credits where you get it and there is the need to reconcile it on the return. So if you made too much, you have to return it. And if you made too little, you could possibly get more.
So that letter… There’s one sent out to each taxpayer on the return. So if you’re a married couple, you’ll actually receive two forms, each of them reporting the amount you received. And, hopefully not a surprise, the number of children the IRS thinks you have. So, hopefully that number is accurate.
The other letter that a lot of clients were actually getting earlier in the year, so last fall, was going to be the third-round stimulus letter, letting them know how much they received, and it might have been anywhere from April through the end of the summer that they received that. Again, that’s something that each taxpayer is going to report on their return so that if they… Unlike the Child Tax Credit, you don’t have to repay that. But if you got too little, and your income on your ‘21 return is less, then you’ll actually get a larger credit there.
The final item is going to be an ID PIN letter. So if you’ve ever had a identity theft issue, a lot of the times people will sign up with the IRS, that way they are… There’s no risk of them losing any information. And so each year, the IRS will send you a brand new PIN letter. And of all the things that the IRS sends you, this is the worst thing to lose. Because obviously it’s sent to you to protect your identity, so getting a replacement copy is extremely difficult and time consuming. It’s not something your CPA could do for you, unfortunately. And a lot of the times evolves confirming odd and old financial information from old mortgages, things of that nature that might be hard for a random person to track down. So if you get one of those, always… Recommendation is to scan it or get a copy to your CPA and then put it in a file where you know you won’t throw it away.
But outside of what the IRS is sending you, what else could taxpayers do, Candace?
Candace: So, for right now, a lot of it’s going to be a waiting game. Because we’re waiting for K-1s, 1099s, all those other things that are going to come usually closer to February. But in the meantime, you can go ahead and start organizing all of your information that does not come on a government form. So this is going to be largely deductions, but everything else that you were hopefully keeping track of during the year, and if not, now going to take the fun time to go back through everything you did in 2021.
So the first one, and biggest one, I get asked about is charitable donations. Most charities, I think send letters as you make the donations. If you’re consistently donating, a lot of times they’ll send you a summary in January of everything you gave last year, so keep that. Even if you’re not itemizing your deductions, you can deduct up to $300 in charitable donations per person per taxpayer. So if you’re married, $600. So keep track of those, even if you think you don’t have any intention of itemizing your deductions.
Real estate taxes is another one where if you just have to go dig out the receipt, any estimated tax payments that you made during the year… Sometimes people forget how much they paid and when, so getting those dates and amounts. Childcare receipts — so a lot of daycare centers will automatically send those out in January. But if not, especially if you’ve maybe used an in-home service, get those totals for the year. 529 contributions — go