This is the week when some are scrambling to finish their tax returns which are typically due in mid-April. That’s not the case in 2021. The IRS recently announced that it is pushing back the federal tax-filing deadline until May 17.
This gave some an extra month to make sure they were prepared to do everything properly.
The extra time may take some pressure off, but you can now make good use of the time to identify all the ways you can better manage your personal finances as they relate to your taxes. Here are four tips to consider as you put your final numbers together.
Tip 1: Claim a charitable donation deduction even if you don’t itemize
With the standard deduction doubled in recent years, fewer people benefit from itemizing deductions. That kept them from claiming a deduction for charitable contributions. On your 2020 federal tax return, even if you choose standardized deductions, you can claim a $300 deduction for cash contributions made to qualified charitable organizations. In 2020, the limit applies to both singles and married. For 2021, a similar provision allows the deduction of cash charitable contributions of $300 single/$600 married, filing jointly.
Tip 2: Obtain a stimulus payment you may not have received
Some people who saw their income decline in 2020 might not have qualified for government stimulus payments that were based on 2019 income levels. If you may have qualified based on your 2020 income, you can claim a Recovery Rebate Credit on your 2020 tax return.
Tip 3: Be prepared to claim unemployment benefits as income
For those with adjusted gross incomes below $150,000, a special provision for 2020 allows you to omit gross income of $10,200 in unemployment benefits you received in 2020. However, anything above that amount is included in income and taxed at applicable ordinary income tax rates.
Tip 4: Extend your time if you need it
If even the May 17 filing deadline isn’t long enough, you can file for an extension by that date. Then your taxes won’t be due until Oct 15. If you anticipate having to pay additional taxes when filing your return, you must make that payment by the May 17 deadline to avoid a penalty. The deadline for making the first 2021 estimated tax payment remains April 15.
Always check with your tax professional and financial adviser if you have questions.
Ellie Tobin Stubbs is a financial adviser with Ameriprise Financial Services Inc. in Barre. She specializes in fee-based financial planning and asset management strategies and has been in practice for 18 years.