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Your 2021 Tax-Preparation Checklist  Thumbnail

Your 2021 Tax-Preparation Checklist

By Angela Dorsey

Tax season can be stressful and frustrating even in the best of times; factor in a year full of uncertainty and it’s understandable if you want to stick your head in the sand and avoid it. We’re here to help! Here’s the trick: the better prepared you are, the sooner you can shake off that stress and forget about tax filing until next year. We’ve created a tax-preparation checklist to help you do just that! 

Gather Your Personal & Income Information

Instead of letting your tax documents pile up on your counter or get lost in your inbox, create an organized system for the following:

Income Information

  • Form W-2: These are issued by employers and show your wages and tax withholdings. They are supposed to be mailed by January 31.

  • Form 1099-MISC: These report income you have received as an independent contractor or freelancer. You should receive one from each person or company that pays you.

  • Form 1099-INT: This form will show any interest you have earned.

  • Form 1099-R: This form reports income received from annuities, IRAs, or pensions.

  • Form 1099-DIV: Any dividend income you earn is reported on this form.

  • Form 1099-B or 1099-S: You will receive these if you have any income from the sale of property or stock.

  • Form 1098: You will get this from your mortgage company reporting the interest that you paid.

  • Form 1098-T: This reports payments of qualified tuition and expenses.

  • Form 1095-A or 1095-C: These forms report your healthcare coverage for the year and your premium tax credit, if applicable.

  • Schedule K-1 (Form 1065, Form 1120S, or Form 1041): This reports income for a partner, a shareholder, or an income beneficiary of an estate or trust. The Schedule K-1 normal deadline can be as late as April 15th. 

Income-Reduction Documents

  • Form 1098-E for student loan interest paid, or loan statements for student loans received

  • Form 1098-T for tuition paid or receipts from the institution you or your dependents attend

  • Receipts for any qualifying energy-efficient home improvements

  • Records of IRA contributions made during the year

  • SEP, SIMPLE, and other self-employed pension plan information

  • Records of medical savings account (MSA) contributions

  • Moving expense records

  • Self-employed health insurance payment records

  • Alimony you paid

Personal Information

If you want your tax-filing experience to be painless, you’ll also want to make sure that you have all of your and your dependents’ personal information available, such as: 

  • Social Security numbers and birth dates

  • Copies of last year’s tax return (helpful, but not required)

  • Bank account number and routing number, if you wish to have your refund deposited directly into your account

Organize Your Documents For Itemization

Also, if you itemize your deductions, you’ll need records to include your totals and provide proof. 

Deductions And Credits

  • Childcare costs: provider’s name, address, tax ID, and the amount paid

  • Education costs: Form 1098-T, education expenses

  • Adoption costs: SSN of the child; records of legal, medical, and transportation costs

  • Form 1098: Mortgage interest, private mortgage insurance (PMI), and points you paid

  • Investment interest expenses

  • Charitable donations: cash amounts and official charity receipts

  • Medical and dental expenses paid

  • Casualty and theft losses: the amount of damage, insurance reimbursements

  • Records/amounts of other miscellaneous tax deductions: union dues; unreimbursed employee expenses (uniforms, supplies, seminars, continuing education, publications, travel, etc.)

  • Records of home business expenses

Taxes Paid

  • State and local income tax

  • Real estate tax

  • Personal property tax

Take Note Of Changes

Okay, so that’s the nitty-gritty of what you’ll need in front of you to thoroughly fill out your tax return. But there are also a few things to think about that could impact how you file, such as any changes that have occurred this year. Did you add another child to your family? Did one of your children start college? Did you start taking withdrawals from a retirement account? All of these changes need to be reflected on your tax return but won’t show up on prior returns. Be aware of tax credits and deductions you may be eligible for.

More than personal changes, there may be changes to federal or state tax law that you should be aware of. The Tax Cuts and Jobs Act tax reform bill of 2017 is still being implemented, and the new SECURE Act could also affect your 2020 tax situation. 

Specifically, you should stay on top of annual changes to retirement plan contribution limits. For the 2020 tax year, you can put up to $6,000 in any type of IRA. If you are over age 50, that amount goes up to $7,000 thanks to the $1,000 catch-up contribution. Annual contribution limits for 401(k)s, 403(b)s, the federal Thrift Savings Plan, and most 457 plans also increased by $500 for 2020. The new annual limit on contributions is $19,500. If you are 50 or older, your yearly contribution limit goes up to $26,000. And if you are eligible to contribute to an HSA, you can save $3,550 if you have single medical coverage and $7,100 if you are covered under a qualifying family plan. If you are 55 or older, those limits go up another $1,000. Keep in mind that for IRAs and HSAs, you have until April 15th, 2021, to contribute for the 2020 tax year. 

A knowledgeable financial professional can help you understand any tax law changes and how they affect you.

Make A Plan For The Future

Tax season is a stressful time of year that we’re happy to help you through. But we want to do more! We can work with you to create a customized, detailed blueprint of what you need to do in order to meet your long-term financial goals. Are you optimizing all of the tools available to you to minimize your taxes? Do you have a plan for your tax refund that will further your overall financial goals? 

If you want to be proactive about tax planning and you don’t have a trusted advisor yet, we would love to help you experience confidence in every aspect of your financial plan. Get started today by scheduling a free introductory 30-minute phone call!

About Angela

Angela Dorsey is the founder and fiduciary financial advisor at Dorsey Wealth Management, a fee-only financial planning firm based in Torrance, California, helping successful women and couples prepare for retirement. Angela earned a BS in computer science from Loyola Marymount University, an MBA from UCLA Anderson School of Management, and spent 20 years as a Senior Compensation Specialist in large corporations before becoming a Certified Financial Planner™ (CFP®) and a Registered Investment Advisor (RIA). That background gave her the tools to couple with her passion for empowering women to make the best financial decisions possible. Angela lives in Torrance, California, with her husband and two children. She enjoys spending time at the beach or surrounded by nature. To learn more about Angela, connect with her on LinkedIn.