When a new year begins, it’s generally not acceptable to make any changes to your 2020 tax situation since your income and deductions are based on the cash receipts and payments that end of the previous year.
But there are still a few things that can be done to lower your 2020 taxes.
Certain payments and related deductions can be made all the way until October 15, 2021, the last date for filing your 2020 tax return under the tax extension. The IRS has extended the deadline to May 17, 2021 however (at this time) if you owe you are still required to pay by April 15, 2021. This affects the deadline to which you can make a traditional IRA payment deductible on your 2020 return.
1.Make a Payment to a Traditional IRA.
Whether or not the deadline is April 15 or October, an IRA contribution gives you a tax deduction while increasing your retirement investments. IRA contributions can reduce your adjusted gross income for the previous year by a dollar-for-dollar amount.
2.Contribute to a SEP IRA or Solo 401(k).
With a Simplified Employee Pension IRA, (SEP IRA), the tax-deductible contribution for 2020 can be made up to $57,000. These retirement accounts can both be set up and contributed to up until September 15 or October 15, 2021, depending on the type of entity you have.
3.Health Savings Account.
Many individuals are enrolled in a high-deductible health plan (HDHP). In order to pay for all of the medical bill costs that are below the deductible amount, a health savings account may be the answer. Funds contributed to such an account are tax deductible. And when funds are removed to pay for medical expenses below the HDHP deductible amount, the funds are not taxable. If the funds are not used up in a given year, they roll over to subsequent years and accumulate. Deductible contributions must be made by the initial filing deadline each year.
4.Eliminate Tax Penalties.
Although the deadline for filing tax returns is May 17, 2021 all taxes owed are to be paid by April 15, 2021 even though the tax return has been extended. For those who received unemployment benefits, there are portions that may still be taxable depending on your adjusted gross income and the amount that you received.
Contact the Tax Professionals at Marshall Jones
You can contact Marshall Jones to set up an appointment to review your tax needs.