Tax Season 2021 Will Look Different for Most of You I hope that you are all healthy and safe. This past year has been like no other. As a family with three (soon, four) kids with multiple businesses, and a constant concern for the health and wellbeing of my loved ones, clients, and staff, I can only imagine what you are all are also facing. My hope is that you don’t feel alone – that you know that we are all in this together and that we will persevere.
With that being said, I owe it to you to provide you some insights as your community tax professional. Insights that provide you a realistic expectation of what the 2021 tax season will look like – for you and this nation. First, let me back up for a minute though.
I have found that the secret to contentment is accepting the fact that life is full of uncertainty. Once you accept this, you will realize that you cannot control your situation – only your response to the situation that you’re in. Whether you are now required to work from home, you’ve become your child’s schoolteacher, or you were laid off from your job. These are real scenarios, but there are many more out there just like them.
My advice to is to set realistic expectations. Expectations of yourself, your family, your children, your production at work and of what you can get done between it all. For instance - if you don’t expect to go on vacation in 2021, then you can reasonably wrap your head around that truth now; making the actuality of that scenario less disappointing than booking the vacation and cancelling it later.
So as a professional who prepares a lot of tax returns for the community, I am going to apply this little known secret to this upcoming tax season. Hopefully, by providing you these updates, it’ll help you set a realistic expectation of what your tax return might just look like:
The stimulus check you got over the summer: This is not taxable income and in almost all cases, won’t impact your refund or balance due. In fact, if you were due more than you got (either you didn’t receive your check at all or you had a baby in 2020), then you can expect that to be reconciled as a part of your tax refund!
Giving to charity, but don’t itemize?: For those who contribute to church or other organizations, but you don’t itemize anymore, you are now eligible for a $300 tax deduction that is not a part of your standard deduction calculation. So be sure to give your tax preparer those giving statements as you are going to get the benefit.
Unemployment benefits: Unfortunately, a great deal of people were temporarily laid off or lost their job this year. Thankfully, our government gave those impacted a chance to collect unemployment benefits at both the state and federal level. The problem is that this is going to be considered taxable income at both the federal and state level. And for most, they likely didn’t have enough (if any) taxes withheld to cover the tax due. Expect to receive a 1099-G which will report this income to you so be sure to give this to your tax preparer.
The new W-4 and withholdings calculation: As the IRS continues to work towards their goal of a “net zero” tax return, they proposed a brand new version of the W-4 this year. This form is used by your employer to calculate a more accurate amount of taxes you should withhold. So, if your tax refund or balance due is different from your usual, it might be from your tax withholdings.
Using a tax professional amid a pandemic: This tax season might look a little different for you if you use a tax professional. From sending your tax documents through a portal, to having a “meeting” virtually, my thought is if you have your taxes prepared by a specialist, go into it with an open mind and extra patience. Technology has evolved so much, but for many local firms, they’ve been slow to adopt it. Which is why this pandemic has forced their hand at going digital and remote all at once. So, this will be as new of an experience for them as it is you.
The bottom line is that this will be a unique tax season for most of us. So, if you can go into it with the expectation that you owe, then you’ll be less disappointed when you actually do. And best case, you might actually get a tax refund! Either way, we are honored to share this insight with you, and we hope to continue to make an impact in your lives along the way