Tax Planning Pages

12 Year-End Tax Tips: Credits, Breaks

The Tax Year ends on December 31.

Before you prepare and e-file your 2021 federal and state Tax Return on eFile.com, you may want to ask yourself this question:

"How can I save money on my taxes?"

Here are three simple ways you can save money and reduce your taxes:

  1. Spend less money on everyday purchases throughout the year. Use our simple day-to-day money saving tips for frugal living and maximize your monthly budgets!
  2. Update your paycheck withholding on your federal Form W-4 and receive your tax refund money now or owe less tax when you file your next tax return. Use the free eFile.com Tax Withholding Assessment Tool to find out how much tax to withhold and reach your tax goals!
  3. Claim tax breaks you qualify for on your tax return by December 31, such as tax credits and tax deductions.

Tax To-Do's By December 31

You can eFile your 2021 Tax Return beginning in January 2022. It is important to consider which tax credits and tax deductions you can claim on your 2021 Tax Return before 2021 ends. For example, if you have a child born on January 1, 2022 or after, you cannot claim the Child Tax Credit on your 2021 Tax Return; you would have to wait until the beginning of 2023 to claim the credit on your 2022 Tax Return.

Here are 12 Tax Tips to get you prepared for Tax Day:

Topic
Description
Towards the end of the year, it may be a good idea to wrap up any 2021 contributions to traditional IRAs, 401(k)s, or other account you plan to deduct on your 2021 Return. Consider making these to your IRA, contribute to your HSA or MSA, and finish your annual contributions to your 529 education plan. Review the contribution limits on the linked pages to plan your finances. Alternatively, make sure you have taken your required minimum distribution or RMD if you are obligated to do so by the end of the year.
A Flexible Spending Account or FSA can be used to pay for certain medical expenses or dependent care. If you do not use all the money in your FSA by the end of 2021, you are only able to roll over or carry forward up to $550 into 2022.
By the end of the year, finalize any trades or sales of stocks or assets you may hold. Consider the pros and cons of long-term and short-term investments, capital gains or losses, and the taxes of each category - details on the linked page. Sell any stocks that may be beneficial to sell by the end of 2021 and keep those which would yield more benefit in the long run. You may be able to sell investments at a loss in order to offset your taxable gains. See details on cryptocurrencies and NFTs.
Create your own or follow the linked checklist to be sure you are prepared to prepare your 2021 Taxes. File your own taxes by following the step-by-step process on the eFile Tax App.
Your 2021 statement, income, deduction, and tax forms are generally issued by January 31, 2022. Gather these forms and keep them handy for when you are ready to prepare your taxes. These include a W-2 for wages or salary, a 1099 from self-employment or retirement income, receipts for donations to charity, and other statement forms.
Taxpayers can now deduct up to $600 from charitable donations while still taking the standard deduction. Keep track of and make any payments that may be tax deductible for 2021 by the end of the year, such as the contributions above or deductible mortgage interest payments.
If you are self-employed, purchase any assets you plan to deduct on your 2021 Taxes by the end of the year. Any business purchases completed in 2022 do not qualify and will be deducted when you file your 2022 Taxes in 2023. Finish these transactions and keep receipts so you can report the money spent on your taxes. eFile.com will help you report these and also claim the Qualified Business Income Deduction (QBI).
To get an idea of what your return may look like, we recommend using the linked calculator to see how your taxes may be figured when you file in 2022. You can use estimated figures or actual numbers from your tax forms when using the calculator to see various results.
The deadline to file and pay 2021 Taxes is April 18, 2022. If you owe taxes, file a return or a tax extension by this date to reduce or eliminate any tax penalties. Additionally, pay as little or as much due tax as you can if you owe. If you miss the April deadline, you can only e-file 2021 Returns until October 15, 2022 - after that date, you will have to manually prepare tax forms.
Use tax software to prepare your own taxes and save money by not paying a certified public accountant or CPA. Tax software will help you claim tax credits you may qualify for. eFile.com offers simple, affordable, step-by-step tax preparation and e-filing for federal and state tax returns. e-Filing and selecting direct deposit is the simplest and quickest way to file taxes and get your tax refund. Begin preparing your return in January of 2022, but don't file until you have added all your forms. Compare eFile.com to other popular tax preparation platforms.
If your 2021 Refund or taxes owed is not what you were expecting, consider adjusting your withholding from your wages. If your refund was large, you may have withheld too much during the year; if you owed taxes, you did not withhold enough. Complete and submit a new W-4 to your employer in December of 2021 or early 2022 so your 2022 Taxes get you closer to being tax balanced.
eFile.com offers completely free online support via your Personal Support Page. When you create a free account and start to prepare your taxes, we are able to offer more personalized support based on your account information. Contact us here.

Here's something else to consider: the values for each tax credit or tax deduction often vary by tax year. Once the value of a credit or deduction for a tax year expires (let's say 2016), you can only claim that value on a 2016 Tax Return; you cannot claim 2016 values on a 2021 Tax Return.

This is why we strongly recommend tax return planning throughout the year in order to take advantage of as many tax credits and deductions you qualify for by the end of the year.

Avoid Surprises by using the eFile.com Tax Calculator and Tax Refund Estimator!

2021 Tax Calculators and Tools

2021 Tax Credits and Deductions

Review all the tax credits and tax deductions you may qualify to claim on your 2021 Tax Return. Tax credits reduce your tax dollar-for-dollar and may even be refunded to you as a tax refund. Popular tax credits include the Child Tax Credit, the Premium Tax Credit, and the Earned Income Tax Credit. There are varying thresholds which may affect the amount of the credit as well as whether or not you qualify to claim it. The eFile Tax App will determine if you qualify for these credits when you prepare your taxes, calculate the amount, and report it on the proper tax forms when you file.

Tax deductions work differently by deducting certain expenses or taxes from your taxable income. One of the more common tax deductions is contributions to traditional individual retirement accounts. This deduction reduces your taxable income by some or all of your contributions. Using eFile.com to prepare your taxes will allow the software to calculate deductions like this on your return for you.

Tax credits, deductions, breaks, or write-offs change each year as the tax code is updated. There are many tax breaks that are officially expired. This means that under current law, none of these credits and deductions are available to claim on 2021 Tax Returns. Our expired tax laws page provides details on these tax breaks.

We will update our site with the latest information on tax breaks as soon as any official announcements are made. Stay up to date on the latest tax law changes and news with eFile.com!

Tax Help for January 2022

When can you file 2021 Taxes? How to maximize my 2021 Refund?

See the items in the table below to get a better understanding of the 2022 Filing Season for 2021 Taxes to get the most out of your return.

Timeframe
Tips, Help
Early January
If you have not done so already, get an early start by estimating your taxes using this free calculator. Gather your forms and use actual figures or use simple estimates. By early January, you will be able to sign into your eFile account and prepare your taxes to see what your return may look like in real time.
Early January
The 2022 Tax Season starts in January of 2022 to begin preparing and filing 2021 Taxes. You can use the eFile platform to begin preparing your tax return once the season is underway. When the IRS begins processing 2021 Returns, you will be able to e-file your federal and state returns.
End of January
By this point, you should have received your tax forms and other statements as employers and other issuers are required to send these by the end of January. Depending on your situation, this may include other forms or letters, such as:
Early February
Begin preparing your taxes on your eFile account if you have not already. Use all the forms you have received and other documents from your records to be sure the information you enter is accurate and let the eFile Tax App handle the calculations. If possible, be sure you have a trusted bank account established that you know will not be closing or changing for your tax refund. This will allow the IRS to directly deposit this instead of mailing a check in the mail.
January - April
Generally, the IRS allows you to make contributions to certain accounts (retirement, HSA) in the early months of 2022, but apply them for 2021. For example, if you wanted to contribute the maximum amount of $3,600 to your HSA as a single taxpayer, but only contributed $3,000 by the end of 2021, you typically have until April 15, 2022 to contribute the additional $600 to this account and apply it to your 2021 Taxes.
After Filing
Once you have sent your returns to the IRS and state and they have been accepted, track your tax refund or verify that your payment has been processed by checking your bank account or IRS account.

More Tax Planning and Help

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