The past year was challenging for much of the country. Now, as we move forward into 2021, we must also plan for April 15 and the possible tax ramifications this date signifies for many.
At this time, we’d like to take the opportunity to offer actionable advice you can use to help you with your tax prepping and planning for the year. These tips will help ensure you’re on the right track for tax season and may help you avoid some of the potential penalties and other problems that can come with filing your taxes.
Seek Help with Your Taxes
It may be in your best interest to seek the help of a tax preparation specialist. These professionals understand various tips and techniques you can use to reduce your tax obligation or maximize your refund, whichever the case may be.
This is especially the case if you’re one of the millions of people who lost their job in 2020, were laid off for a portion of the year, or were furloughed by your employer because of the pandemic. Even if you were fortunate enough to continue working throughout the year, you might have faced salary reductions, reduced pay, and other issues that affected your income for the year. A professional tax preparation service or CPA can help make sure you’re not overpaying or underpaying your taxes for the year.
Business Owners Need CPAs
The bottom line is that Paycheck Protection Loans (PPP), stimulus checks, and other issues may have affected your bottom line greatly for the year. More importantly, they may have tax implications. It is important to work with a CPA that is knowledgeable about the tax ramifications of the pandemic. They can help you work through your tax burden for the year and help prepare you, a little ahead of time, for what tax time in 2021 may have in store.
If your business closed down during the pandemic, whether permanently or temporarily, your CPA can help you understand how this will affect your taxes so you can pay the appropriate amount when the time comes.
Make Your Retirement Contributions
In order to impact taxes for 2020, you have until April 15, 2021, to invest in your retirement accounts. This includes IRAs, 401(k)s, etc. Tax-deferred deductions to these accounts can help you reduce your current tax burden, which can save you big on your tax bill. At the same time, it’s helping to fund your retirement.
You win in multiple ways when you make maximum retirement contributions each year. Just make sure you do not exceed the allowed amount, or you could face unexpected fines and fees. Again, working with a professional tax preparation service can help with this as well.
We’re Here to Help!
Tax time can be stressful under normal circumstances. If you were affected financially over the last year, whether through job changes or as a business owner, you should strongly consider working with a tax preparation professional or CPA this year.
If you have questions about making last-minute IRA contributions, please stop by any of our convenient branch locations or call us at 800-782-4899.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.