5 Last-Minute tax tips for 2021
With the due date for taxes coming up soon, there's a good chance you're feeling a little stressed right now, even with the new extension to May 17, 2021. Most people don't love filing their taxes, even if they do end up getting a refund. However, the more confident you are that you're filing your taxes accurately, the better you'll feel about the whole ordeal. Here are five last-minute tax tips that can help you file your taxes accurately, on time, and in a way that maximizes your return.
Double-check your contributions to retirement accounts.
Many retirement accounts are tax-deferred plans. This means that you don't have to pay taxes on the money you contribute. SEP IRA, 401(k), and traditional IRA plans all fall into this category. Before you file your taxes, check how much you contributed to these various plans throughout the past year. Make sure you deduct those contributions from your taxes.
Report self-employment income from side gigs.
Did you earn any money outside of a formal job? Maybe you started a side business mowing lawns, designing websites, or giving music lessons. You are required to report this income as self-employment income and to pay the relevant taxes on it. So, go through your records and make sure you have accurate reports of this income. Either give this information to your tax prep professional or enter it as self-employment income when you use software to prepare your taxes.
Consider contributing to a 529 college savings plan.
If you have children and you want to reduce your tax burden, consider contributing to a 529 college savings plan. You have until May 17th this year to make contributions for the previous year, and any contributions that you do make will be deducted from your taxable income. Not only will contributing to this plan save you money on taxes, but it will also help ensure your child has the funds they need to attend college one day.
Make note of any charity contributions.
Most donations to charities are tax-deductible. Think back over the past year, and note any charitable contributions that you made. Any tithes or offerings made to a church or religious organization typically count. If you donated any used clothing, furniture, or household goods to organizations that help the poor, you can deduct the value of those items. In previous years, you could only deduct charitable contributions if you itemized your deductions, but this changed in 2020 under the CARES Act.
File for an extension if you're not ready.
This was a challenging year for many people. If you do not have all of your information prepared and fear that you won't be ready to file your taxes by May 17th, you can request an extension. As long as you request an extension before taxes are due, you won't pay any additional fees for filing late.
Hopefully, these last-minute tax tips will help you get your return in order with less stress and worry. If you have any additional concerns or questions, consider hiring a tax preparation professional to guide you.