How to Prepare your 2020 taxes | Tax Preparation Ways and Services
The 2020 tax season recently started, and suddenly, you are asking how to prepare your 2020 taxes. To be honest, such a question should have been asked at the beginning of the 2020 tax year. That is, in January 2020. Doing so would have given you enough time to implement tax strategies and to hire a suitable tax preparer around you, or anyone you prefer well in time. It’s definitely better than running around with limited time between now and April 15 deadline.
More so, it allows you to benefit from many tax credits and deductions. With that being said, you still have time to hire a tax professional for 2020 taxes. As a tax professional myself, I know we have wonderful tax tools to catch the 2020 tax season deadline.
However, keep it in mind that once you hire a tax professional for 2020 taxes, it’s better to keep them with you for 2021 taxes. You will see how this works in your favor next year when you eventually file 2021 taxes. Remember, I always say, like death, taxes are inevitable. So, yes, preparing for a federal tax return starts months before the official start of the tax season. Always keep that in mind!
So, I will help you, in this article, with information that you can use to figure out both tax preparation ways and services for both this tax season and also for 2021 taxes.
What is tax preparation?
This is a process when a tax professional prepares a tax return for someone else for a fee. These tax professionals are often called tax preparers. However, some individuals opt to file their own federal tax return. Individuals that file without the help of a tax professional usually file taxes online, using various tools.
However, to navigate the tax chaos and avoid mistakes, it’s recommended to use a tax professional.
Tax professionals are qualified and registered with the IRS. Therefore, besides protecting you from scams like tax identity theft, they help you save money through taxes. I know this as I have been helping hundreds of my clients do this every year.
You could be asking, save money how?
Well, when you, or your tax professional submit a tax return, tax forms are filed with a tax authority. These forms report your income, expenses, and other pertinent tax information. And, filing tax returns allow you to calculate your tax liability, schedule tax payments, or request refunds for the overpayment of taxes.
And here, I am more interested in the part where you request refunds. The information you use to request refunds is based on your income and expenditure during the year. And here is where I come in with my tax preparation tools: I put you in the “refund guarantee” class as I do your tax preparation carefully analyzing your income and expenses in order to fish out any transactions worth a credit or deductions.
What is the importance of Tax preparation in 2021?
It’s a no-brainer that the current chaos, thanks to the pandemic, calls for more financial savviness. Meaning you should do anything in your power to save more money and spend less. And one way to save money is through taxes as mentioned already. Therefore, only thorough tax preparation guarantees healthy savings.
I hear people often asking, “What’s the best tax software for 2021?” or, they ask, “How much money can you make without paying taxes?” All these questions are asked by individuals looking to save some money. They either don’t want to pay a tax preparer and use electronic filing. Or, they want to know if they are exempt or not.
But if you hire a professional to prepare your taxes, you won’t need all the runaround, wasting time and energy. Therefore, don’t just file taxes in 2021; prepare your return with a tax professional. How you prepare your 2020 taxes plays a major role. It determines how much you avoid mistakes and save money through taxes.
Will there be a tax refund in 2021?
This year, what you are filing are 2020 returns. And these are for the tax year dominated by COVID-19 adjustments, including stimulus checks for businesses and Economic Impact Payments (EIP) for individuals. Therefore, our incomes were affected in one way or the other. If you are running a business, your business tax is affected, and the same applies for individual taxpayers.
So, to answer the question about refunds, indeed, you can expect a refund. But remember, everything depends on whether you qualify for tax credits and deductions after you already paid more tax estimates during the year and withheld more than you should have. For it to work, though, you or your tax preparer must be thorough with your tax preparation forms. So, also in this, tax preparation takes center stage.
And, there are also individuals that did not get their EIP last year and early this year. These can claim the Recovery Rebate Credit (RRC) to reduce owed taxes. If such individuals have already paid more estimated taxes, or had their employers withhold more taxes during the year than what is owed after applying the RRC, they can claim a refund on the overpayment.
When can you start filing taxes in 2021?
2020 taxes are already being filed since the tax season opened on February 12, 2021. With that said, it’s also important to ask such questions as, “When is my 2020 tax return due in 2021?” This helps you do all your tax preparation within a healthy timeline and submit before the deadline – free of errors.
What is the minimum income to file taxes in 2021?
If your income did not reach a certain level, you don’t have to file 2020 taxes. This applies for gross earned income and other incomes. I mentioned other incomes because I often get questions like, “Does Social Security count as income?”
Well, for tax purposes, it does count as income and is taxable at certain levels. For example, if you are an individual filer, half of your Social Security is taxable if your income is between $25,000 and $34,000. If it is below $25,000, your Social Security is not taxable.
Other people also ask how much money you can make without paying taxes. Well, this differs with your status as a taxpayer. For example, a married separate filer must file a federal tax return if minimum income is $5. Single filers under the age of 65 must file a tax return if minimum gross income is $12,400. You can find more information on the rest here.
Nevertheless, do not worry a lot about any questions you might have concerning 2020 taxes. My team and I are always here to help. And there is still time to hire me to prepare your 2020 taxes. Don’t let this moment pass. Contact me today.