WASHINGTON — Taxes aren’t what most people want to think about in the holiday season – but there are a few things you can do now to make Tax Day a little easier. Whether you're taking advantage of pandemic-related changes or just getting important documents in order, a bit of preparation can go a long way for the average taxpayer.
Check to see if your charitable contributions can get you a tax break
A temporary change could give you some extra incentive to give to charitable organizations this December.
Usually, only taxpayers who itemize can get a deduction for charitable contributions – leaving out many who take the standard deduction. But thanks to a temporary pandemic-related provision, taxpayers don’t need to itemize to claim a deduction when they file in 2022.
Tax Accountant and TurboTax blog editor Lisa Greene-Lewis said donating to charity is something she recommends before the end of the year.
“It's really popular right now, it's a good time to give to charity,” Greene-Lewis said. “And for the 90% of taxpayers that claim the standard deduction… they can now claim a charitable deduction for cash donation up to $300.”
For married couples filing jointly, that number can go up to $600. To be eligible for the temporary provision, charitable donations must be made by Dec. 31, 2021.
You can search for qualified charitable organizations on the IRS’s website.
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Consider maxing out your retirement accounts
Do you have a 401(k) or other retirement plans? IRS spokesperson Raphael Tulino said it’s always a good idea to max them out before the end of the year if you can. Not only is it more money in your plan, it’s a way to reduce your money’s exposure to taxes.
You can contribute up to $19,500 in a 401(k) this year and up to $6,000 to an IRA ($7,000 for those who are 50 and older).
“The bottom line is, you can always reduce the taxes you pay – if you can or if you'd like to – by increasing your contributions to retirement vehicles,” said Tulino.
You can find information about different retirement plans and their yearly limits on the IRS website.
See if you’re eligible for any missed stimulus money
Did you miss out on the third stimulus check, or get less than the full amount? You might be eligible for a Recovery Rebate Credit on your 2021 return. You can check for eligibility and learn how to claim the credit on the IRS website.
Greene-Lewis said this might apply to newly independent college students, or to parents who’ve recently added to their families.
“If you had a baby in 2021, the IRS didn't know that,” she said. “So you may be able to get stimulus in the form of a recovery rebate credit when you file.”
The IRS says you'll need "the total amount of your third Economic Impact payment and any plus-up payments" to claim the credit and avoid processing delays. Greene-Lewis said she recommends getting stimulus documents -- and other important tax documentation -- in order now to make things easier when you file.
The IRS said you'll also get IRS Letter 6475 in early 2022, confirming the amount you got for the third stimulus and plus-up payments. The IRS's list of other stimulus documents is available here.
Missed out on the first two stimulus payments? Those applied to the 2020 tax year, but it's not too late. The IRS says eligible taxpayers who missed out on those can still file a 2020 tax return (if they hadn’t filed already) or amend their 2020 tax return.
Know what tax credits you’re eligible for
Tulino says taxpayers should make sure they aren’t overlooking anything that could get them a tax credit. One example is the Savers Credit, which is available for lower or moderate income families who contribute to a retirement account.
“So you can actually save twice for your retirement,” Tulino said. “Not only are you saving the money you put away but there's a tax credit available.”
Tax credits can also be a big help for new families.
"If you had a baby in 2021, you want to make sure you have their social security number," Greene-Lewis said. "You have to have their social security number in order to claim some big credits like the Earned Income Tax Credit."
Determining what credits you're eligible for now -- and preparing any needed documentation -- can save you a lot of stress when you file. You can see the IRS list of tax credits here.
Check your withholding
Do you generally get a large tax refund? Lots of people do – Forbes reports that the average refund in 2021 was $2,775! Part of that sum came from new provisions like the Recovery Rebate Credits, but it’s still only up $280 from the year before.
“And that's a lot of money that you let the government withhold for you throughout the whole year,” Tulino said.
Tulino recommends using the IRS’s withholding calculator to keep the difference as close to zero as possible. That way, you can have that money on hand all year – especially since the pandemic could delay your refund.
“A lot of folks had to wait longer than normal for refunds,” Tulino said. “You don't have to do that – you can keep the money in your own pocket and make those adjustments going forward.”