Time to go into 2021 with a financial plan that can help us grow and prosper!
"When your income changes, what qualifies as an allowable tax deduction may also change, along with the tax brackets, this income falls into. Proactive tax planning is imperative for self-employed and small business owners. Most filers will need to pay at least a certain percentage of the taxes before yearend to avoid IRS penalties.Yes, there are a few ways to minimize your taxes after New Year's Eve, but most of your tax planning tools will be limited once we reach 2021."
Deadline for your 2020 Retirement Account is April 15, 2021: Not only is this the date to file your 2020 taxes but you can also contribute to your IRAs, Roth or Traditional, up to $6,000. For SEP-IRAs (self-employed) you may be able to contribute up to $57,000 for 2020. Even better, you have until October 15, 2021, to fully fund the account. That assumes you file your taxes on an extension. Also, SEP-IRA accounts can be opened just before you file your taxes.
Are you withholding enough money from your paycheck? Make sure to check using the following IRS calculator to ensure you won't have a big tax bill come next year. Tax Withholding Estimator
Standard Deduction vs. Itemize Your Tax Deductions: "Under the Tax Cuts and Jobs Act (TCJA), a vast majority of taxpayers will simply choose the standard deduction when filing their personal income taxes. Previously, around 30% of taxpayers filed a Schedule A to itemize tax deductions. However, under the most recent tax plan, that number has dropped to just 10% of filers. Taking the standard deduction is one of the easiest ways to file your taxes. You will not need to save receipts to validate your tax write-offs. All the same, it is worth the hassle to itemize your taxes if it saves you money!"
Year-End Tax Loss Harvesting: "Tax Loss Harvesting may be one of the biggest wins for people tax-wise in 2020. Those with proactive financial advisors may find they are able to capture substantial short-term losses during the COVID-19 bear market that occurred earlier in 2020 while enjoying the strong market recovery we have seen since then." (Abacus CPA can help you navigate this if you don't currently have an advisor.)
For more tax planning ideas, tips & tricks, give us a call at 1-833-CHAT-CPA, click the link to the articleor join us on the free webinar below this Wednesday, Dec 2nd at 8pm