It's never too early to begin preparing for tax season! Take some time this month to take stock of your finances and tax situation, so you won't have to stress come April.
Each year, there are a few changes to the tax policy that you'll want to be aware of when filing your tax returns. This month we're sharing a brief outline of the most significant updates and important deadlines, as well as information about COVID-19 relief and your taxes.
If you decide you need a professional to help with your taxes, give us a call at 781-635-9022. We can connect you to a trusted and thorough tax professional, in our network, to get the job done right. Prepare now to get ahead of the game and make life easier this spring!
Important Tax Dates in 2021
April 15 - Deadline to file and pay taxes or request an extension.
October 15 - Last day to file a tax return if you received an extension from the IRS.
Retirement Tax Restrictions Ease Up
Qualified individuals who had to tap into retirement accounts early in 2020 because of the COVID-19 pandemic are getting a break.
- More time to pay back early withdrawals without being taxed.
- No income tax required on money borrowed from 401(k) if paid back in five years.
- 10% penalty waived for early IRA and 401(k) withdrawals.
Standard Deductions Increased Slightly
- Filing Single - Increased to $12,400 in 2020 vs $12,200 in 2019
- Married Filing Jointly - Increased to $24,800 in 2020 vs $24,400 in 2019
- Head of Household - Increased to $18,650 in 2020 vs $18,350 in 2019
Retirement Contributions for Tax Year 2020
Individual contributions are unchanged for 401(k)s and Individual Retirement Accounts (IRAs).
401(k) - Under Age 50 is $19,500 and Over Age 50 is $26,000
IRA - Under Age 50 is $6,000 and Over Age 50 is $7,000
No Tax on Stimulus Checks
The payment many Americans received in 2020 under the Coronavirus Aid, Relief and Economic Security Acts (CARES Act) --$1,200 for singles, $2,400 for couples filing jointly--was an advanced distribution of a 2020 tax credit, and will not be taxed.