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January 2021 Tax Tips

Happy New 2021 Tax Year! It's got to be better than 2020, right? Right?!?

Tax tip pencilHello 2021. I cannot tell you how happy we and this is not the royal we; I'm speaking for myself and all  are to see you arrive.

We all know that you're not going to immediately turn all the crazy that was 2020 around, even in the tax world. But hope springs eternal with the start of a fresh 12 months.

Please don't disappoint us!

COVID-19 complications pushed filing of 2019 returns to mid-July last year. Even then, some folks got extensions into October. That means that the crush of taxes was with more of us than usual for longer than usual.

But the Internal Revenue Service says it is ready to get this 2021 filing season started on time. Fingers are crossed that the agency is able to do that.

And so that we taxpayers will be just as ready, the ol' blog's Tax Tips return.

Still not necessarily daily: Over the years that Tax Tips has been a regular feature on the ol' blog, it's undergone some changes.

In the beginning, during the January through April 15 high tax filing season, a new tip appeared every week day. Then I got ambitious and expanded the tips to weekends, too. Then reality hit, and I went back to Monday-through-Friday tips only.

Then I got older and gained a little more of a work/life balance perspective. So in 2019, the Tax Tips started showing up when they showed up, but with at least a couple a week.

That continued in 2020. And, you guessed it, the tidbits of tax advice will remain on this schedule again in 2021.

But fear not, fellow tax geeks! I promise you'll still get lots of valuable filing information here on the ol' blog and in the featured Tax Tips. 

Those posts that earn the honor of being dubbed official Tax Tips will be, as in prior years, highlighted at the top of the ol' blog's right column, just under the old-school yellow No. 2 pencil tip image.

New monthly tip collections: This year, though, there will be one other change. The Tax Tips are going year-round.

Technically, they were posted throughout the year, but separated into filing season tips through, well, the end of the filing season in mid-April. Then they were featured as Weekly Tax Tips as an acknowledgement that things had, hopefully, slowed down a bit after most of us submit our 1040s.

But again, as 2020 showed us, taxes persist whatever the calendar. So all the tips will go up without any pre/post-April designation. They'll simply be Tax Tips.

On thing will continue, though, will remain. Once a tax tip is posted, it will be will be archived on a monthly tax tip page. Since you're reading this, you know the January 2021 is live. The subsequent months' tip collections will go up when those months arrive. You'll find the links at the bottom of this page.

But I'm getting ahead of myself. Let's get to 2021 taxes and tips for all the planning and filing moves we need to make so we can finish up our 2020 tax year duties and reduce our 2021 taxes, which started running on Jan. 1.

  1. Tax rates and income brackets for 2020 & 2021 — Hello January, the month when tax years collide. We're getting ready to file our 2020 tax year returns, but we're also starting to make plans that, if implemented properly, will reduce our 2021 tax bills. Key information for both years includes the tax rates and income brackets they encompass. You can find 2020 and 2021 tax rates and brackets in the first of the ol' blog's 10-part annual inflation series. And at the end of that post, there's a directory to the nine other tax areas affected by annual inflation adjustments. (Jan. 1, 2021)
  2. Reporting your winnings to the IRS — Uncle Sam apparently is Lady Luck's cousin. Your lottery jackpot, as well as other gambling winnings and prizes, are taxable income. Here's how to report them to the Internal Revenue Service on Form 1040's Schedule 1. (Jan. 11, 2021)
  3. Final 2020 estimated tax payment due — Do you pay estimated taxes? Your final 2020 tax year payment is due on Friday, Jan. 15. And if you got unemployment benefits or did gig work last year, take note. You likely owe this, too, on this money that's not generally subject to withholding. (Jan. 13, 2021)
  4. Free File 2021 is open for business — If you made $72,000 or less last year, you can use Free File. And you can use it now. The no-cost online tax return preparation and e-filing partnership between the Internal Revenue Service and Free File Alliance tax software companies is open. (Jan. 15, 2021)
  5. Tax software enhances sign-on security — When you log on to your tax software this filing season, expect it to take a tad longer. Many tax software programs now are requiring multifactor authentication. (Jan. 16, 2021)
  6. Tax filing season starts Feb. 12 — Eager tax return filers, mark your calendars. The Internal Revenue Service will start accepting 2020 tax year returns on Feb. 12. Yes, that's about 2 weeks later than usual, but we're all still feeling COVID-19's annoying effects on our taxes. And the IRS says some refunds should be issued by early March. (Jan. 17, 2021)
  7. Deducting volunteer expenses — There are many ways to give to charities. One is by volunteering at your favorite nonprofit. While you can't claim the cost of your time or expert services, you can count related expenses, such as office supplies you bought the charity or miles driven to deliver meals to the homebound, as an itemized charitable tax deduction. (Jan. 18, 2021)
  8. Statements needed to file your tax return — The only good thing about the IRS pushing the opening of tax filing season to Feb. 12 is that by that date we should have all — OK, most of — the tax statements we need to complete our tax returns. (Jan. 19, 2021)
  9. IP PIN option now available to all — Worried about someone stealing your tax identity? The IRS now is letting all taxpayers get an Identity Protection Personal Identification Number, or IP PIN, which will help the agency stop fake returns claiming fraudulent refunds. (Jan. 20, 2021)
  10. Student loan interest tax deduction — Having student loan payments on hold during the COVID economic struggles has helped. But if you paid on your higher-education debt before the pandemic relief was implemented last year, be sure to claim any student loan interest on your 2020 tax return. (Jan. 21, 2021)
  11. 7 reasons to file your taxes early — Tax filing season 2021 is later than usual, leaving millions champing at the bit to get their 1040s to the IRS. Here are some reasons why they're so eager to file soon. Some might apply to you, too. (Jan. 25, 2021)
  12. Homeowner tax breaks — Owning a home can be hassle, but many still want this part of the American Dream. And the tax code can help with some tax breaks. Here are 6 of the more popular tax benefits of owning a residence. (Jan. 26, 2021)

As I mentioned earlier on this inaugural 2021 Tax Tips page, as soon as January wraps and all this month's tips fill up this page, I'll move on to February through December Tax Tips on their own pages.

All the Tax Tip page links already are live and listed below. If, however, you click later in the year, you'll be greeted by a fun GIF instead of tips. Tax info will replace that animated fellow when the months arrive.

January July
February August
March September
April October
May November
June December

 

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Today's Tax Tip

  • Take a pre-disaster inventory — Disasters strike year-round and all across the country. Just ask Texans who were hit in Feb. 11, 2021, with a freakishly cold winter storm. The best thing we can do is prepare. Part of that is taking a pre-disaster inventory of your household goods. It will help you with your insurance claims and, if the catastrophe is declared a major disaster major disaster, claim your losses as a tax deduction. (Feb. 24, 2021)

  • Tax Tip; click pencil for all tax tip links

  • The 2021 Tax Tips offer ways to file your annual return, along with post-filing advice, important tax news and, of course, ways to cut your current tax year bill. You'll find the monthly assemblages on their own respective pages: January, February, March, April, May, June, July, August, September, October, November and December. While we're waiting for the 2021 calendar pages to flip and fill up with timely tax tidbits, check out 2020 (and earlier) tax years' advice.

COVID-19 & Taxes

  • COVID-19
    Coronavirus has wreaked havoc
    on the 2020 tax season.
    These three Coronavirus (COVID-19) and Taxes pages have details:
    March-July 2020,
    August-December 2020, and
    January-… 2021

All About Kay

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    Kay Bell — Native Texan (the blog title totally makes sense now, right?). Professional journalist. Tax geek.

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  • Tax Season 2021 is here!
    Happy New Tax Year! Are you ready to file your 2020 tax return? Me neither. With all the delays last year due to COVID-19, it seems like that prior tax season just finished. But time and taxes wait for no taxpayer. The Internal Revenue Service, which started 2021 by delivering more coronavirus economic relief payments, says it will be ready for our returns. So let's get prepared, too. The monthly tips and reminders a little further down this column should help us focus on our taxes and make the filing of them by go more smoothly. Also keep an eye on the countdown clock just below. It will help us keep track of how much time we have until Tax Day on April 15, just in case some of us want to put things off until the final hours. .
    Note: I'm in the Central Time Zone, so adjust accordingly for where you live.


Time for Tax Tasks


  • monthly tax moves

  • Hello, February, and Love
    to our new 2021 Valentine, the Internal Revenue Service!


    via GIPHY

    Yes, that heartfelt mention of Uncle Sam's tax collector is not a typo or joke. It's recognition that the IRS has set Feb. 12 as the official start of the 2021 tax filing season. What other reason than wanting to be our Valentine could the tax agency have for choosing the Friday leading into St. Valentine's Weekend as the time when it will begin processing our 2020 returns?

    Oh, wait. Maybe to give the IRS time to update forms and computer systems due to year-end COVID-19 law changes? Maybe, but I'm sentimental even when it comes to taxes, so I'm sticking with IRS hearts and flowers. And tax tasks for this shortest month of the year!

    Feb. 1: Because Jan. 31 fell on Sunday, today is the day that issuers of tax information must get the documents at least on their way to taxpayers. Keep an eye out this week for the many and varied tax statements you'll need to file your 2020 return.

    Feb. 2: Happy Groundhog Day!

    Fat Groundhog; click image for Groundhog Day details

    Waiting for your tax statements will help keep you from getting caught in a Bill Murray kind of tax loop where you have to file an amended tax return because you entered wrong info with your first filing.

    Feb. 7: Super Bowl LV is here! Despite some coronavirus complications during the 2020 regular National Football League season, today's 55th Super Bowl will decide the professional U.S. football league's champion. It's also the biggest single betting day of the year, with much of the money going toward goofy prop bets. Just remember, if any of them pay off, then you owe tax on your winnings. Note, too, that even if your winnings are part of a fantasy sports bet, the associated taxes are very real.

    Feb. 10: Coronavirus vaccines are rolling out, albeit slowly, and some pandemic precautions are being lifted. That means some restaurants are opening for a limited number of diners. Other eateries are continuing with take-out meals and deliveries. Whether you're able to enjoy table service or still relying on food brought to your house, remember to tip your server or delivery person.

    restaurant check tip iStock
    If a tip isn't included in your food delivery charge, click the image above to calculate how much to tip the person who brought it to you.

    As for servers who are still on the job, remember that your tips are taxable income. If you at least $20 in job-related gratuities in January, you need to account for them today by using Form 4070 to report your tips today to your employer.

    Feb. 12: Black History Month is celebrated every day this month, commemorating the achievements by black Americans and recognizing the role of African Americans in U.S. history.

    This day is notable, however, because National Association for the Advancement of Colored People (NAACP), the nation's oldest and largest grassroots-based civil rights organization, was founded on Feb. 12, 1909. That was the centennial anniversary of the birth of Abraham Lincoln, who issued the Emancipation Proclamation twice.

    One of the NAACP's key divisions is its Legal Defense and Educational Fund.
    If you want to support the Fund's work, you can donate to it and, since it is a 501(c)(3) organization, you can claim it as a charitable tax deduction. If you gave to this nonprofit or any other charity last year, you can claim a deduction. This usually happens when taxpayers itemize, but for the 2020 and 2021 tax years, you can claim some charitable gifts directly on Form 1040. The deduction is up to $300 on 2020 returns for all filers. For 2021 taxes, the deduction remains $300 for single taxpayers, but goes to $600 for married couples who file a joint return.

    Feb. 12: Today is, as mentioned at the top of this tax tasks list, is the day that the IRS will start accepting and processing our 2020 tax returns. If you filed early, your Form 1040 has been in a holding pattern. Now it's officially in IRS hands. So today also is the day you can start your official refund watch.

    Feb. 14: Happy Valentine's Day!

    Do you and your better half file a joint return? Most married couples do. Remember to look over the 1040 carefully before you sign it. When both spouses sign their jointly filed 1040, each is jointly and severally liable for the entire tax amount due. I don't want to spoil your Heart Day celebration, but this means the IRS can come after either spouse for payment of a tax bill, even the husband or wife who is in more dire financial circumstances.

    Feb. 15: Today is Presidents Day, officially honoring George Washington, the Father of Our Country. Over the years, however, this federal (three-day, yay!) holiday has come to commemorate the contributions of all our Commanders in Chief. And we've got to give a (another) special shout out to Abraham Lincoln, who essentially was father of our income tax system, signing into law a tax on earnings to help pay Civil War costs.

    Feb. 19: You tried filing your return, but discovered that your tax situation is much more complicated than you realized. So you've decided to hire a professional tax preparer. Smart move, but don't dally. With the delayed filing season start and all the COVID-19 related tax law changes, reputable tax pros' calendars are filling up fast. Start searching now for a tax professional who best meets your tax needs. And definitely thoroughly check out the preparer you pick before handing over details of your tax life.

    Feb. 23: Or maybe you've decided you'll do your own taxes this year. The IRS recommends you use tax software and e-file your return. That will speed up the processing of your 1040 and, if you're due a refund, get the money on its way to you sooner. The IRS also suggests you use Free File, the online no-cost tax preparation and e-filing partnership between the IRS and Free File Alliance.

    IRS Free File; click image for details

    The official Free File site at IRS.gov has been accepting returns since Jan. 15. You can use one of this year's nine participating tax software options if your adjusted gross income is $72,000 or less, regardless of filing status.

    Feb. 28: Wow! We're already at the end of February? This shortest of months certainly flew by while we were having tax fun. However, if you filed your 1040 back on Feb. 12 (or earlier) because you're expecting a refund, you're probably thinking it's taking a long time for you to get your money. You can check the status of your return online using the IRS' online "Where's My Refund?" tool.

    Small Business Tax Calendar: Important filing, deposit and record keeping dates throughout the year that your company needs to know. You can get more tax calendar information at the IRS' online calendar page and view the full year's important business and individual tax dates in IRS Pub. 509.

State Tax Help

  • Don't forget your state taxes!
    Forty-three states and D.C. collect personal income taxes. But even if you live in of the seven states without an income levy, you still face other state (and local) taxes.

    State Tax Departments provides links to your state's Web page. The companion page, Tax Tidbits, is the compilation of blurbs about each state's tax laws. And for more state tax news, check out all our state tax bloggings.

Tax Forms

  • Tax Forms
    Thanks to our increased use of tax preparers and computer software, many of us don't see our tax forms until we sign and file them. But knowing what's on these documents, either in paper or digital form, and why the IRS wants it is key to understanding our tax system. And knowledge definitely is power, especially when it comes to tax savings. Find this valuable information in the ol' blog's special Tax Forms Fiesta! page.

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    I am not a professional tax preparer.
    The content on Don't Mess With Taxes is my personal opinion based on my study and understanding of tax laws, policies and regulations. It is provided for your private, noncommercial, educational and informational purposes only. It is not a recommendation of any specific tax action(s) you should or should not take. Similarly, mentions of products or services are not endorsements. In other words, my ramblings on the ol' blog are free advice and you know what they say about getting what you pay for. That's why when it comes to filing your taxes, I urge you to get additional, professional, paid-for guidance from an accountant, Enrolled Agent or other qualified tax preparer who is familiar with your individual tax circumstances.

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Tell it to the Hill


  • While it's easy to rail at the IRS, for the most part we can thank — or blame — our tax laws on Congress and the White House. So if you have an issue with tax legislation or want a tax bill passed, use the federal legislator locator above to find just who on Capitol Hill should hear your concerns. And for matters tax or otherwise closer to home, you can find info on your state and local elected officials at USA Gov.

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