January 24th, 2022 marks the start of the 2021 tax filing season. With another eventful year quickly coming to a close and the tax season rapidly approaching, preparation is key. Planning ahead and being prepared for the upcoming tax season can help ensure an accurately filed tax return and avoid unnecessary IRS processing issues or delays. Here are some steps that you can take to stay ahead of the game for the upcoming tax season.
Gather and Organize All Tax Documents
Take the time to collect and organize any 2021 tax documents and financial records you have already, and create a folder or other storage place for items arriving soon. This includes documents such as W-2s, K-1s, 1099s, 1095-A, and others. Having everything organized and together can make the filing process faster and more efficient for you and your accountant.
If you’re a business owner with a Schedule C, a rental property owner with a Schedule E, or a farm owner with a Schedule F make sure you have all of your 2021 related data organized. This includes records of how much income you’ve made from your business during the year as well as any business expenses paid.
Below is a list of common tax forms and records that you may receive for the filing of your 2021 tax return in the coming weeks.
| Who Receives these Forms |
Tax Forms |
| Employees |
W-2 |
| Self-employed |
1099-NEC |
| Unemployed Individuals |
1099-G |
| College Students and Graduates |
1098-T and/or 1098-E |
| Investors |
1099-Div, 1099-S, Schedule K-1, and/or 1099-MISC |
| Homeowners |
1098-MIS |
| Retirees |
SSA-1099 and/or 1099-R |
Do you think you have enough deductions to itemize for 2021? Make sure to include this information in the documents that you organize and provide to your accountant. Providing this information to the accountant that will be preparing your tax return will help the filing process run smoothly and ensure you receive the proper deductions for your situation. Some information you may want to gather, organize, and provide to your accountant if you plan on itemizing include:
- Amounts paid for medical and dental expenses
- Real estate taxes paid during the year
- Personal property taxes paid during the year
- State and local income taxes paid during the year
- Mortgage Interest paid during the year (You will usually get a form 1098-MIS for this, but if it is an intrafamily loan you may not receive one in the mail.)
- All cash and non-cash charitable contributions made during the year
Inform Your Accountant of Any Significant Changes Made Throughout the Year
Did you move out of your old home and change your address in 2021? Did you get married during the year or change your name? Make sure to let your accountant know! Any significant changes made during the year 2021 must be reported on your 2021 tax return. Here are a few informational changes that may need to be discussed with your accountant:
- Change of legal name
- Change of address
- Change in marital status
- Any changes related to dependents claimed
- Any birth or death in your immediate family (While adopting or losing a pet may not impact your tax return, we love pets too and want to know!)
You should also inform your accountant of any life events during the year that may have affected your income. Here are a few examples of financial changes that may affect your income:
- Change in employment
- Sale of primary residence or any property
- Purchase of a home
- Start of a new business
- Working in another state (there may be some state filing requirements)
- New investments
If you owed money on your 2020 income tax return, you may have made estimated tax payments for the 2021 tax year. These are quarterly payments that go towards your 2021 tax balance on your return. Make sure to let your accountant know if you made these payments, how much you paid, and when these payments were made.
Changes Impacting the 2021 Tax Filing Season
With the effects of Covid-19 still being prominent throughout the year, it’s important to make note of these covid relief items that may affect your 2021 tax return.
Recovery Rebate Credit
At the beginning of 2021, the IRS issued Economic Impact payments (also known as stimulus payments) to eligible individuals. Individuals were eligible for up to $1,400 plus $1,400 for each qualifying dependent. Make sure to let your accountant know if you received the third Economic Impact payment and exactly how much you received. The IRS will be issuing Letter 6475 in January of 2022, which will detail your eligibility for the recovery rebate credit and how much of the economic impact payments you received in 2021. If for some reason you did not receive the full amount of the third economic impact payment, you may be eligible to claim the recovery rebate credit on your 2021 federal tax return. This credit can reduce the amount of tax due and potentially increase your refund.
Advance Child Tax Credit Payments
Individuals who were eligible to receive advance child tax credit payments in 2021 should be receiving a Letter 6419 issued by the IRS in January of 2022. This letter will detail the total amount of advanced child tax credit payments that you received in 2021. Make sure to inform your accountant of this information. If you received less than the total credit that you’re eligible for, then the remaining amount of the credit can be taken on your 2021 tax return. If you received more than what you’re eligible for, then you may need to pay the excess amount with the filing of your 2021 tax return.
Above the line Charitable Contribution Deduction
Individuals who aren’t itemizing on their 2021 tax return can still deduct certain cash donations to charity on their return. This deduction is limited to $300 for individual taxpayers and $600 for married individuals filing joint returns. If you don’t have enough deductions to itemize in 2021, but still made some cash donations to charities during the year make sure to let your accountant know about these donations made.
Having a game plan and taking the right steps to prepare for the upcoming tax season can help tax season be less daunting. It can also help with making sure your return is accurate and processed without any issues or hiccups. It’s always a good thing to be one step ahead when it comes to your taxes. Make sure to consult with your HBK tax advisor about any questions or concerns you may have about the upcoming 2021 tax filing and plan accordingly.
