A Time To Get Prepared

As I look at the calendar and realize we are already over half way through January I become aware that it is Tax Season! I know what this means for me, but do you know what this means for you? As a tax preparer I expect the next few months to be busy. I expect that I will have many conversations about taxes and what has changed this year compared to the past. I expect all the things I expect every tax season. My fear is that this tax season is going to be very different for many tax payers. 2020 changed at least one aspect of life for almost everyone I know. This might include unemployment, working from home, taking money out of savings or retirement to pay bills, or at the very least receiving EIP 1 and/or EIP 2 (the two rounds of stimulus money sent). All of these are things that your tax preparer will need to know about and may change your tax situation from the past. Many of these items will produce new forms that will need to be brought to your tax preparer. These forms may include 1099-G for unemployment income, 1099-R for retirement savings distribution or 1099-B for the sale of stock or other investments. I’m also sure these facts will make a tax preparer ask you more questions. Did you receive both stimulus payments? When and how much each time? If you took money out of retirement was it pretax or post tax money? Was it a loan or a withdrawal? These are just a few of the questions I know I will be asking many of my clients. We can all agree that 2020 was a year like no other. It changed the way we look at many things. In the tax world we always live a year in the past. This means, unfortunately, we are not done with 2020 just yet. I would encourage anyone who had any changes because of 2020 to seek the help of a tax preparer this year. The changes could create headaches for you as you prepare your 2020 tax return. Also why let 2020 exist in your life longer because you got a letter from the IRS in the summer of 2021 and they want to re-examine your 2020 return.