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Year-End Tax Planning for 2021

2021 Tax Prep Suggestions 


To help you prepare for 2021, some of our tax professionals have started compiling a list to assist you with your year-end planning and organization to make next year’s tax season the smoothest thing to come out of 2020. 

Year-end planning suggestions:

  • Consider making additional charitable contributions before year-end to reduce tax liability. For taxpayers that itemize, the CARES Act increased the adjusted gross income limitation on cash contributions from 60% to 100% for cash contributions to qualified charities in 2020. For taxpayers that do not itemize, a $300 charitable deduction is allowed “above the line” in 2020.
  • Consider making a Qualified Charitable Distribution (“QCD”) from your IRA, if eligible.
  • Consider year-end gifts as part of an overall estate planning strategy. Donors may gift up to the $15,000 annual exclusion per donee in 2020 with no impact on the lifetime exemption amount of $11.58 million in 2020.
  • How are your total expected W-2 withholdings compared to prior years? If you expect your tax liability to increase for 2020, it might make sense to consider increasing your W-2 withholdings for the year on your final paychecks for 2020. W-2 withholdings are considered to be made evenly throughout the year and can help reduce any potential underpayment penalties from not making estimated tax payments timely.

Organizational suggestions:

  • Save your receipts! Whether or not you have receipts for charitable donations, business expenses or rental property expenses, it is important to substantiate deductions taken for the year. Now is a great time to begin collecting those receipts stored away for tax time. Sometimes year-end bank or credit card statements can provide a helpful summary of the different categories of expenses you had for the year.
  • Keep track of life events: If you have any major life events that would affect your taxes, make a note of them throughout the year. It will be much easier to record the necessary details as they occur rather than waiting until the next year trying to remember what happened in the previous year. 
  • If you know of any significant changes from the prior year, let your accountant know because it may change the estimated payments you need to make to avoid penalties. 
  • As you receive your tax documents early next year, store them away in a folder until you’re ready to remit them to your accountant. This will help ensure no documents are lost in the meantime. 
  • If you have opened new accounts or closed old accounts, be sure to communicate this with your accountant to help ensure all income is considered for the year.
  • Keep a list of new investments to provide your accountant. This will further help ensure no new investments are mistakenly left out on the tax return, preventing the need for an amended return.
  • Safely store your documents
  • Dedicate a specific drawer, folder, or corner to tuck away all your tax documents as they come in. Many items trickle in, but if you just stash them somewhere safe right away, they will all be in the same spot. This will make it easier on you when it is time to look at them. 
  • Excel: As accountants, Excel is a powerful tool that we use all day every day. But it is also a user-friendly tool that can track simple lists and calculations. Do you have expenses for your Schedule C? You do not need to send us all your receipts for the year - you can simply list them in an Excel spreadsheet and let it calculate the total for you! This will make it easier for you to track but also leaves less room for error on our side.
  • Don’t wait: Go ahead and send us your tax documents once you have the bulk of information in. There is no need to wait until you have every single item in. We can get a head start preparing your return and help you track your open items.

Please check back periodically for additional tips. Happy planning! 

Contributors: Kristen Whitlow, Christine Glennon, and Hannah Robinson.