Another tax season is underway. With this year’s official deadline of April 18, rather than the oddball deadlines in May and July that we’ve seen in recent years, this season has some new items to consider and some old things to review.
For parents, your child tax credits were boosted to $3,000 for each child between the ages of 6 and 17. And, for your younger children, you also get an additional credit of $600. But, don’t forget, you likely already received half of your child tax credits in the form of those mysterious monthly deposits that began in July of last year and just as mysteriously ended in January.
For retirees over age 70 ½, if you used your IRA for some charitable donations, be sure to review your tax forms before passing them on to your tax preparer. It’s important for you to know that brokerage firms don’t subtract your donations from their tax reports. Let your tax preparer know how much you donated from your IRA.
One more thing about IRAs. All workers, regardless of age, can contribute to an IRA to help offset their earned income. A few years ago, the age limit for IRA contributions was eliminated. So, if you’re 72 or over and were therefore required to distribute money from your IRA, you can at least offset some of your tax bite by contributing money right back into your IRA. But, please remember, you must have earned income to make an IRA contribution.
For people who have high-deductible health insurance coverage, you are likely eligible to contribute to a health savings account or HSA. You can contribute right up to the tax filing deadline. HSAs are kind of like the Holy Grail of taxes. You’ll get a tax break today and you’ll never have to pay any taxes on this money or its earnings as long as it is used to pay for qualified medical expenses.
Next, if you find that you routinely owe money at tax time, look for income sources to automatically have your tax payments withheld for you. For employees, your paycheck is the most logical source for your tax withholding. For self-employed people who don’t draw any paycheck, you’re stuck having to make quarterly estimated tax payments. And, for retirees, talk to your financial advisor about establishing automatic tax withholding from a combination of your IRA distributions, pension benefits or even your Social Security. Trust me, it’ll make your life a lot easier.
Finally, if you didn’t receive your $1,400 stimulus payment last year, now is your chance to get that money. You probably received an IRS letter that summarized the payments they believe you received. Be sure to scour your bank records to confirm the payment actually landed in your account. After your review, if you are still certain you didn’t get any stimulus money, ask your tax preparer to claim your missing tax credit on this year’s tax return.