CHICAGO, IL – No pressure, but the countdown to Tax Day is on!
We’re two months away from the April 18 deadline to file your taxes, and you may want to start working on them now.
There are a significant number of changes that will apply to tax year 2021.
WGN News Now got some helpful hints on preparing taxes from Dan Rahill, Managing Director at Wintrust Management, and a CPA.
Rahill said taxpayers need to be aware of Economic Impact Payments, commonly called stimulus checks. He said 175 million people received stimulus checks in March of 2021 based on 2019 and 2020 tax return data. According to Rahill, you could be owed money if you didn’t receive the full amount of the tax credit.
Rahill said a lot of families may also qualify for additional Child Tax Credits and not know it. This is due to the credit being increased under President Biden’s American Rescue Plan in March. Rahill said qualifying families need to make sure they pick up the additional credit on their 2021 tax return.
There have also been some changes to charitable contributions as individuals who don’t itemize their deductions can now take a deduction up to $300, while joint filers can take a $600 deduction. He also points out that these deductions need to be cash.
Unemployment compensation is also changing since you must now pay taxes on the full amount of your unemployment. In 2020, the first $10,200 of compensation was not taxable, according to Rahill, but now it is taxable.
If you’ve worked remotely during the pandemic, you may need to pay taxes to more than one state. If you live in a state that’s different than where your company is based, you could owe taxes in multiple states. He adds if you worked remotely out of state at your parents, friends, or a vacation home during the pandemic, you very well could owe taxes in more than one state as well.
If you used cryptocurrency to make a purchase, even if it was for a sandwich, Rahill said buyers are required to report the transaction as taxable to the IRS. He also adds that if crypto is held in a taxable account, net profits from a sale are taxed as long or short-term capital gains, and losses can be used to offset gains.
Rahill also reminded people over the age of 72 to make their required minimum distributions. RMDs are the minimum amount you must annually withdraw from your retirement accounts if you meet certain criteria.
He urged everyone to file electronically if possible and recommends people check out the IRS free online tax prep known as Free File or contact the Illinois CPA Society.