It’s that time of year again. You know the one I mean, tax time. You’re probably thinking, “Oh no, it’s not. I don’t have to think about taxes until at least April or even later.” You might be remembering last year. The pandemic was upon us and the date for individuals to file their taxes was extended to July 15, 2020. You may think that you don’t have to worry about taxes now or anytime soon, because we are still in a pandemic, you’re counting on the filing date to be extended again. And sure enough, the deadline for federal income has been extended to May 17, 2021, what about state income tax?
Start getting all of your information together to make it easier to prepare your tax return. Watch the mail carefully for all the forms that various agencies and others will be sending you. If you have a job you know that your employer will send you a W-2. If you have investments you will be getting a report from those who manage the investments. Partnerships are required to file tax return and send information to the partners because income from a partnership flows through to the individual’s tax return. Your bank will be sending you information on interest you earned and interest you paid.
If you collect Social Security, you’ll receive a SSA-1099 from the Social Security administration listing the gross amount you received and how much you paid for Medicare insurance. If you receive a pension from a previous employer, then you’ll receive a 1099 from them showing the total pension paid, minus any deductions such as federal or state taxes.
Getting all of your information together to help you file your 2020 taxes will help Get Hold of Your Money in 2021.
If you have a simple return and prepare your own taxes, the IRS has free software or free fillable forms you can download. If you have a more complicated return you might want to use a tax preparation software like TurboTax.
If you use a tax professional like a tax attorney or a CPA, you will find information on their websites about what they think will be happening this tax year. Some firms also send out newsletters to their clients. Make sure that the individual or company you hire to prepare your tax return is qualified to do so.
To find out what qualifications various tax preparers need to prepare your tax return go to the IRS’s website, IRS.gov, and look for “Understanding Tax Return Preparer Credentials and Qualifications.” There you’ll find descriptions of tax preparers’ education qualifications and exactly what they’re able to do as far as the IRS is concerned. As an example, enrolled agents are licensed by the IRS. They are subject to what’s called a suitability check and must pass a three-part special enrollment examination. This examination requires them to demonstrate proficiency in federal tax planning, individual and business tax return preparation and representation. They also must complete 72 hours of continuing education every three years.
Enrolled agents, CPAs and attorneys have what is called “unlimited representation rights” before the IRS. These tax professionals may represent their clients on any matters, including audits, payment collection issues, and appeals. Other tax preparers have “limited practice rights”. They may only represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the taxpayer advocacy service.
Note. I no longer practice as an accountant, so each year I do my little happy dance to the tune of “I don’t prepare taxes anymore.” However, I do keep up with what’s happening with taxes, because taxes affect each and every one of us in so many ways, most of which we are not even aware. To Get Hold of Your Money, you need to know all about where your money goes, including paying taxes.