Plan for Tax Year 2020, 2021
Fail to Plan Is Plan To Fail!
The deadline has expired for Tax Year 2019 planning. Now is the time to plan for Tax Year 2020, January 1, 2020 - December 31, 2020.
You pay taxes with your hard earned money. Taxes can be complicated and stressful, and you could waste your money if you don't plan properly. And planning properly includes working with the right people and correct website. Use these easy to follow tips to help minimize stress about your taxes: Stupid and Smart Things Taxpayers Do When Filing Taxes.
If you want to either reduce your taxes or increase your refund for your next return, then tax planning throughout the year is critical. In addition, when planning for life changing events (marriage, home purchase, career change, etc.) you should also consider the possible tax implications. The same is true for unplanned life changing events, they might have unplanned tax consequences.
In summary, tax planning is the process of acquiring the latest tax knowledge and taking the necessary steps to reduce your income tax burden.
Here at eFile.com we help you with tax planning by not only providing free tools to help you, but we also ask you relevant questions that could lead to a reduction in your income tax. December 31st is a critical deadline for each tax year. This is because certain contributions (e.g. medical plan contributions, etc. ) have to be completed by the end of the calendar year. And in the case or a marriage or divorce, December 31st is the key date when it comes to selecting your filing status. The source or type of income you receive throughout a tax year will also help determine your taxable income.
Generally, most qualifying tax deductions and tax credits for a given tax year have to be expensed by December 31st of the applicable tax year. An exception is retirement plan contributions; an IRA contribution can generally be made all the way up until the April 15th filing deadline.
Tax Plan Time Guideline
1. Year-Round Tax Planning: January 1 - December 31
- Adjust your paycheck withholding with a Form W-4 so you get your next tax refund now. Do you want your tax refund in your paycheck? Recent IRS statistics show that almost 100 million of all Americans get a tax refund check, and the average refund check is $2,400. So why not get some of this refund now as part of your regular paycheck? Every month most taxpayers pay an average of $200 too much in income taxes.
- Tax loopholes for honest taxapayers.
- If your income has not changed from last year, use our 2021 Tax Return Calculator. Alternatively, you can use the year-to-date income from your latest pay stub to estimate your expected annual income for the year. Please keep in mind that our calculator is based on currently available figures which may be subject to adjustment.
- Access your eFile.com tax return account and download the PDF file of the previous year tax return. In addition, collect all your previous year's tax records (e.g. W-2s, 1099s, retirement contributions, medical expenses, charity contributions, etc.).
The IRS recommends that you keep all tax-related records for 3 years in case of an audit. However, old tax documents (such as last year's W-2's) can come in handy when you are filling out your current year's tax return. An example of some of the tax records you should store from previous years (and reference for next year's income tax return) is listed below. If you prepare and eFile via eFile.com part of our customer service is to provide you a PDF copy of your IRS and State tax returns for the past 5 years. This is not an exhaustive list and you my have additional forms or receipts that are not listed below. TIP: To make your mountain of documents easier to store, try scanning them and keeping them as PDF files. This way, you can print them out if you need them. If you do this, please remember to back up your computer files!
- W-2 forms
- Pay stubs for the year
- Home mortgage payment stubs and/or home purchase closing statement
- Last year's tax return (for quick reference and comparison)
- Receipts from anything you might claim as an itemized deduction
- Receipts from any charity (e.g. for clothing donations, church tithes, disaster relief donations, etc.)
- Car mileage log (in case you intend to claim it as a business expense)
- Any receipts for business travel expenses
- Canceled checks (especially for IRA contributions and other deductions)
- Credit card statements and bank statements (these can be used to verify any deductions)
- Medical bills (especially if they exceed 7.5% of your income)
- 1099-G form (for deducting state or local income taxes)
- 1099 forms (from any dividends or other income paid to you)
- Mobile phone bills (especially if you made charitable donations by text message)
- As for current tax year planning you can start by collecting W-2's, 1099 forms, medical expense receipts, charity donations, retirement contributions, child care expenses, alimony payments, canceled checks, and your previous year returns. This will help ensure you are ready to file next year's tax return or prepare for a possible tax audit.
- As stated above, please keep records for at least 3 years in case of an IRS tax audit. For your own peace of mind, you might want to keep them longer. Start a file folder at the beginning of each year, and put all of your receipts into it.
- Check your pay stubs against your W-2 to make sure they add up. Even employers can make mistakes!
- Study last year's tax return. Are there any credits and deductions which you are still qualified to take? Are there any you did not take, but you qualify for now?
- Donate to charity! The IRS generally only requires receipts for charitable contributions of $250 or more, but it's a good idea to keep receipts for any donation.
- If you have planned your taxes successfully enough to receive a tax refund, you should invest it in an Educational Savings Account, an IRA, or a savings account at your bank. Use the money to start preparing for next year's taxes.
- You don't have to take the standard tax deduction. Use our tax calculator to itemize your deductions, then see whether the resulting amount is higher than the standard deduction available to you. Always choose the higher amount! When you prepare your return with us, our software automatically uses the best deduction method for your tax situation.
- Review existing (or start new) retirement plans or contributions
- Look at these Tax Savings options or honest taxpayer loopholes
2. From April 15 - October 15
- If you e-Filed or filed a federal tax return extension, make sure you have all the tax documents you need to complete and file your 2019 return by October 15, 2020.
- Update your W-4 paycheck withholding now and get your tax refund earlier.
- Plan or pay your estimated tax payments for tax year 2020
- Make sure you keep copies of past tax returns and know where they are for at least three years in case you receive an IRS notice.
- Summertime Tax Tips: How do summer and taxes go together? You can take advantage of deductions that relate to all your summer activities (such as camp expenses for dependent children). These summer tax tips will help you save money when you file your tax return later.
3. From October 15 - December 31
4. Tax Time Planning: January 1 - April 15
In most years, April 15th is the general tax return filing/tax payment deadline. If you missed the April 15th deadline, you can still efile your return until October 15, 2021. During this time the IRS requires Federal Income Tax Returns to be filed for the current tax year. Most states also require State Income Tax Returns to be submitted during the same time period, but some of them have a deadline of May 1st (as opposed to April 15th).
During Tax Time you will enjoy the benefits of proactive tax planning as listed under point 1 - 3 above. As a reminder:
- Make sure you have received all W-2 forms, 1099 forms, and other tax documents before you start preparing or e-filing your IRS and/or State Tax Return.
- Use the eFile.com free Tax Calculator and estimate your taxes before you actually e-file.
- Use any of the many free easy to use tax tools on eFile.com, for example:
- If you have questions about your estimated 2020 Tax Year results, contact an eFile.com Taxpert. We are here to help!
- Don't forget that electronically filing your taxes is easier, more accurate and faster than paper filing.
- Print out the eFile.com tax preparation and planning checklist to make sure you have everything you need to prepare and file your tax return faster and easier
Plan Now. Avoid Surprises Later.
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