January can be misunderstood when it comes to taxes: You can do a lot more than wait for 1099s and W-2s. There's even time to make adjustments to your 2020 numbers.
With a little planning, you can position yourself to be super organized and maybe even snag some late deductions. Consider these tips from TurboTax and others:
*Get your paperwork together. A tax checklist can help immensely–your CPA can provide one or you can find one online. Gather records and receipts and find your forms. A little time spent organizing now will help things move faster later.
*Itemize your tax deductions. January is a good time to scrutinize this list before you feel a deadline crunch. If you are self-employed, own a home or live in a high-tax area, you might find that you'll save a lot by itemizing rather than taking the standard deduction. TurboTax says itemizing is worth it when your qualified expenses add up to more than $12,400 for most singles and $24,800 for most married couples filing jointly. These include items like mortgage interest, charitable donations and a portion of medical expenses.
*Contribute to retirement accounts. The deadline to contribute to a traditional IRA is April 15. A deductible contribution can help lower your tax bill, but check with your CPA whether yours is deductible or not, and whether it makes sense for you to make a concerted effort. A Roth IRA contribution won't lower your tax bill but may still be a good financial decision, for example.
*Make an estimated tax payment. You typically have until mid-January to make an estimated tax payment and avoid fourth-quarter penalties.
* Read up on COVID-19 tax impacts. Now's a good time to check with your CPA and educate yourself on loan forgiveness, deductions, exemptions and the like that will make the 2020 filing a unique one.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.
