Savant Wealth Management

Tax time will be here before we know it, so right now is a great opportunity to get ahead of the game. We have some reminders from the Internal Revenue Service to help make tax filing easier, along with some special items to consider. With a little advanced preparation, you can make tax time a breeze this year!

Tips to Make Filing Easier

Log In

As you get organized for the coming tax season, start by signing into your online account on the IRS website. There, you can manage your communication preferences, access your tax records, authorize any requests from a tax professional, and even approve and electronically sign Power of Attorney and Tax Information Authorizations from your tax preparer. If you wind up owing for 2021, you can make and view your payments, or create a payment plan from your bank account or debit/credit card.

Gather Your Forms

Next, it’s time to start gathering all the tax records you’ll need to complete your 2021 return. Here are a few items you might need:

  • W-2s from your employer(s)
  • 1099s for things like bank interest, unemployment compensation, distributions from a pension, annuity or retirement plan, and any dividends you may have received
  • 1099-Ks or 1099-Misc for any freelance work you might have undertaken in 2021
  • Documentation of any transactions you may have had using cryptocurrency
  • Form 1095-A, Health Insurance Marketplace Statement, which helps you reconcile any advance Premium Tax Credits for Marketplace coverage you received in 2021
  • Letter 6419, 2021 Total Advance Child Tax Credit Payments
  • Letter 6475, Your 2021 Economic Impact Payment (this will help you determine whether you can claim the Recovery Rebate Credit)

Depending on your personal situation, you may have additional documents to gather, including Form 8822 if your address changed. If you got married, divorced, or took other steps to legally change your name in 2021, you should also notify the Social Security Administration.

Review Your Tax Withholding

Did you receive a large refund or owe a large amount to the IRS last year? If so, use the IRS’s Tax Withholding Estimator to make adjustments to your withholding in 2022. You may also need to adjust your withholding if you got married, divorced, had or adopted a child, or held a second job in 2021. If you decided to join the gig economy in 2022, you will need to estimate the amount of tax you expect to pay in order to calculate potential estimated payments.

Other Considerations

Advance Child Tax Credit Payments

If your family received advance payments last year, you can expect to receive a letter from the IRS that outlines the total amount of Advance Child Tax Payments you received. Keep this with your tax records and use it to determine the amount you are eligible to claim on your return. If you received less than the amount you were eligible for, you can claim a credit for the remainder. Conversely, if you received more than you were eligible for, you may need to repay some or all of the excess amount when you file. Eligible families who did not get monthly advance payments in 2021 can still receive a lump-sum payment by claiming the Child Tax Credit on their 2021 return. The IRS provides more guidance for Child Tax Credit Payments on its website.

Economic Impact Payments

As you’ll recall, many taxpayers received Coronavirus relief payments from the U.S., including something called the “third Economic Impact Payment” in 2021. According to the IRS, the third Economic Impact Payment is an advance payment of the 2021 Recovery Rebate Credit. Eligible individuals who file a joint return may receive up to $2,800, while all other eligible individuals could receive up to $1,400. If you aren’t sure you received an Economic Impact Payment, you can check the status on the IRS website by entering your Social Security Number, birth date, and address. If you didn’t qualify or didn’t receive the full amount in 2021, you may be eligible for the Recovery Rebate Credit; however, you will need to file a 2021 tax return to claim it. You will need to know the amount of your Economic Impact Payment and any Plus-Up Payments to determine the correct 2021 Recovery Rebate Credit when you file your tax return. The IRS plans to send letters containing these amounts to taxpayers early this year. Be sure to keep the letter with your tax records.

Deductions for Charitable Contributions

Don’t forget that even if you don’t itemize, you may still qualify to take a charitable deduction for a donation you made in 2021 to a qualifying organization. Married taxpayers filing jointly may be able to claim up to $600 ($300 for single filers) on their 2021 tax returns. The IRS’s Publication 526 has additional details regarding charitable contributions.

Discuss Your Options with Your Tax Preparer

Looking for other ways to save on your 2021 taxes? Before tax season is in full swing, consult with your tax preparer to discuss any questions you may have, and take a look at the resources the IRS provides on its website. If you also have state income tax, check your state’s official website to learn about its specific reporting requirements. The countdown to Tax Day is already underway, but by starting early, you can look forward to a smooth and efficient tax season.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years. As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

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