The Internal Revenue Service stated that this tax season could be a frustrating one. I want to share what the IRS commissioner said so that you can be prepared, and then also I’ll share a few things you can do now in order to save on your 2021 taxes.
The IRS Commissioner, Chuck Reddick, said this tax season may be a frustrating one as they deal with a lot of backlogs of returns and personnel shortages and more taxpayer phone calls than normal.
“We’re unable to provide the level of service and enforcement that our citizens and tax system deserve and require in many places.”Chuck Reddick, IRS Commissioner
What does that mean for us? Longer-than-normal hold times and longer-than-normal response rates, most likely when it comes to sending out refund payments to you. The time from filing to refund receipt is estimated to be about three weeks.
Individual tax returns for 2021 are accepted starting January 24th. The filing date is April 18 for most taxpayers.
Now, on to some things that can actually lower last year as taxes.
Contribute to Eligible Accounts
If you have one, you may be able to contribute to your health savings account for last year. That will actually lower your adjustable gross income, which will lower your taxable income as well.
Another thing, if eligible, is contributing to your deductible, retirement counts, like IRA or SEP IRA. There are some income limits, so it’s important to make sure that you’re eligible for those.
Itemize Your Deductions
See if itemizing your deductions is worth it. It might be for you if you can add up your qualified expenses and they total more than the 2021 standard. That is $12,550 for most single people and $25,100 for married couples who file jointly.
Many deductions are well-known things like mortgage interest or charitable contributions. You can also deduct a portion of medical expenses that exceed 7.5 percent of your adjusted gross income for 2021.
Working From Home?
Lastly, if you made any extra income on the side last year, or if you’re considered self-employed, you may be able to claim a home office deduction. This means that you may be able to write off expenses that are associated with a portion of your home when you exclusively conduct business in that portion of your home. Possible write-off potential include: rent, utilities, insurance, or housekeeping. The percentage of these costs that could be deductible is based on the square footage of that home office to the total area of your house.
There are some specific rules around home-office deductions. I recommend talking to an accountant or CPA to see if it makes sense for you.