Tag: taxfreeincome

What Is Really The Tax Filing Season

The 2020 tax filing season is delayed until February 12, so the Internal Revenue Service can do additional programming and testing following the December tax law changes.

“If filing season were opened without the correct programming in place, then there could be a delay in issuing refunds to taxpayers,” the Internal Revenue Service said in a press release. “These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.”

The filing season usually opens in late January when the IRS begins accepting and processing returns. Last year, the season started on January 27.“While I am disappointed that this year’s filing season will begin later than usual, I recognize that the IRS has faced extraordinary challenges throughout the COVID crisis,” Ways and Means Committee Chairman Richard E. Neal (D-MA) said in a statement on Friday.

The $900 billion stimulus deal and government-funding bill that passed together at the end of December included some key tax changes for the 2020 tax year.

Eligible taxpayers who didn’t receive the second round of stimulus payments included in the latest stimulus bill or didn’t receive the full amount they were entitled to can claim them on their 2020 tax returns. They can also claim the first round of payments. How the Child Tax Credit and the Earned Income Tax Credit are calculated for the 2020 tax year also changed under the stimulus deal.

Under the government-funding bill, medical expenses now must exceed only 7.5% of adjusted gross income to be taken as an itemized deduction. Before, that threshold was 10%.

Read more: Here’s what to do if you haven’t gotten your stimulus check

The IRS urges taxpayers to file electronically and use direct deposit as a payment method as soon as possible. The agency anticipates 9 out of 10 taxpayers will. receive their refund within 21 days if they file their returns electronically, used direct deposit, and no issues popped up with their return.

People eligible for free tax filing can begin their taxes now and the returns will be transmitted to the IRS on February 12. These are providers participating in the IRS Free File for 2021:

  • 1040Now
  • ezTaxReturn.com
  • FreeTaxReturn.com
  • FileYourTaxes.com
  • Intuit (TurboTax)
  • On-Line Taxes (OLT.com)
  • TaxAct
  • TaxHawk (FreeTaxUSA)
  • TaxSlayer

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By: Denitsa Tsekova

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Read MoreBrought to you byTurboTax.comGreat Ways to Get Charitable Tax DeductionsGenerally, when you give money to a charity, you can use the amount of that donation as an itemized deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

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The IRS Increases 2021 Contribution Limits to SEP IRAs and Solo 401(k)s for Business Owners

The IRS increased 2021 contribution limits for self-employed persons who contribute to a SEP IRA or Solo 401(k) from $57,000 to $58,000. For those 50 or older, there is also a $6,500 catch-up contribution amount allowing total contributions in 2021 of $64,500. The SEP IRA and the Solo 401(k) have become a popular savings tool for self-employed persons who don’t have an employer 401(k) plan, as they allow them to contribute more than the annual $6,000 contribution that is allowed in a Traditional IRA or Roth IRA.

Solo 401(k)s and SEP IRAs are also easier to administer than pension plans, and standard 401(k)s and have proven to be an optimal fit for self-employed persons who do not have full-time employees other than themselves, partners, and family.

The IRS did not change 2021 contribution limits on Traditional IRAs and Roth IRAs and those amounts remain at 2020 levels of $6,000 annually, with a $1,000 catch-up for those 50 or older.

The 2021 income phaseout for Roth IRA contributions begins at $125,000 for singles and heads of household and starts to phase out at $198,000 for married couples filing jointly. If you phase out for standard Roth IRA contributions because you are high-income, you can contribute using the back-door Roth IRA method.

Related: SBA Approves Simple 1-Page PPP Forgiveness Application for Loans of $50,000 or Less

Employee contribution limits to 401(k)s were increased in 2020 to $19,500 and remain the same for 2021. HSA contribution limits for 2021 will go up from $3,550 individual to $3,600, and family contributions will increase from $7,100 to $7,200.

2021 Contribution Limits

IRS 2021 Retirement Contribution Limits

All of these accounts provide tax preferences and benefits over a typical savings account. The HSA, Traditional IRA, Solo 401(k) and SEP IRA all provide tax deductions when you contribute to them and the funds grow tax deferred. For Roth IRAs and Roth accounts in Solo 401(k)s, there is no tax deduction on your contributions, but the funds grow and come out tax-free at retirement.

One of the most significant costs to growing wealth and assets for retirement is taxes. These accounts all provide tax advantages over typical savings and brokerage accounts with non-retirement account dollars.

Related: SEC Expands Accredited Investor Rule

If you are looking for tax deductions, tax deferred growth, or tax-free income, you should be using these accounts. Keep in mind there are qualifications and phase-out rules that apply, so make sure you are getting competent advice about which accounts should be utilized in your specific situation.

And lastly, the power in using these accounts is in maximizing the investement returns. All these accounts can be self-directed and invested into assets you know best. When you contribute funds into these accounts, those funds can be invested to grow. You can then invest into public stock, ETFs and mutual funds, but also into real estate, private companies and funds (LPs and LLCs) and small businesses using self-directed account providers. Consider your investment options wisely, and seek out professional advice as needed to become educated and informed on how to best achieve your financial goals.

By: Mat Sorensen Entrepreneur Leadership Network VIP

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IRAFinancial 1.94K subscribers IRA Financial’s Adam Bergman Esq. discusses the recently announced contribution limits for 2021 for retirement plans, including the Solo 401(k), Self-Directed IRA, SIMPLE and SEP IRAs, along with a historical look at the limits. —

Discover more videos by IRA Financial: https://www.youtube.com/user/IRAFinan… Subscribe to our channel: https://www.youtube.com/user/IRAFinan… — About IRA Financial: IRA Financial Group was founded by Adam Bergman, a former tax and ERISA attorney who worked at some of the largest law firms.

During his years of practice, he noticed that many of his clients were not even aware that they can use an IRA or 401(K) plan to make alternative asset investments, such as real estate. He created IRA Financial to help educate retirement account holders about the benefits of self-directed retirement plan solutions. Learn More: https://www.irafinancialgroup.com/abo…

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