What to do before the tax year ends
There are things taxpayers can do before the end of the year to help them get ready for the 2021 tax filing season. Below are a few of them.
Donate to charity
There is still time to make a 2020 donation. Taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying charities.
Renew expiring ITINs
Certain Individual Taxpayer Identification Numbers expire at the end of this year. Taxpayers can visit the ITIN page on IRS.gov for more information on which numbers need renewal.
Find information about retirement plans
IRS.gov has end-of-year find tax information about retirement plans. This includes resources for individuals about retirement planning, contributions and withdrawals. The CARES Act retirement plan relief waived required minimum distributions during 2020 for IRA or retirement plan accounts. Also, eligible individuals can take a coronavirus-related distribution of up to $100,000 by December 30, 2020 and repay it over three years or pay the tax due over three years.
Contribute salary deferral
Taxpayers can make a salary deferral to a retirement plan. This helps maximize the tax credit available for eligible contributions. Taxpayers should make sure their total salary deferral contributions do not exceed the $19,500 limit for 2020.
Think about tax refunds
Taxpayers should be careful not to expect getting a refund by a certain date. This is especially true for those who plan to use their refund to make major purchases or pay bills. Just as each tax return is unique to the individual, so is each taxpayer’s refund. Taxpayers can take steps now to get ready to file their federal tax return in 2021.