2021 End-of-Year Income Tax Checklist

December 1, 2021
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Now is the time to get started on your end-of-year tax checklist. Check out our recommendations to get on top of the 2021 tax season.

1. Maximize Retirement Contributions

The first item on your end-of-year tax checklist is to maximize retirement contributions. You can maximize your retirement contributions whether you have a Roth IRA or a traditional IRA. 

For 2021, the maximum retirement contribution you can make to your Roth IRA or traditional IRA is the smaller of $6,000 ($7,000 if you’re 50 years old or older) or your taxable compensation for the year.

2. Maximize HSA Contributions 

Second, make sure you’re doing what you can to maximize your HSA contributions. There are three limits to remember for 2021 HSA contributions:

  • The HSA contribution limit for one person is $3,600. 
  • The HSA contribution limit for families is $7,200. 
  • If you’re 55 or older, the maximum HSA catch-up contribution you can make for 2021 is $1,000.

You have until May 17, 2022 to maximize your HSA contributions for 2021.

3. Make a Plan for Year-End Charitable Giving

Tis the season for giving! Now is an excellent time to make a plan for your year-end charitable giving. There are a few ways you can give, such as:

  • Donor-advised funds
  • Private foundations
  • Qualified charitable distributions
  • Special tax deduction from charity donation

Donor-Advised Funds

Donor-advised funds are the first option you may consider for your year-end charitable giving. You’ll deposit your assets for donation to charity by choosing this option, and the charity manages the account. Donor-advised funds can have account minimums, and you may also pay annual fees on the account balance.

Private Foundations

Another option for your year-end charitable giving is to start a private foundation. There’s a required annual distribution that must occur annually to remain in compliance with the IRS. Private foundations also have distribution and expense requirements to consider:

  • Startup expenses ($4,500 to $25,000)
  • Ongoing expenses (annual expenses to operate a private foundation)
  • Initial fund establishment (from $500,000 with a third party to $5 million if hiring staff)
  • Required annual distributions (5% of foundation’s holdings must go to charity)

Qualified Charitable Donations

A third year-end charitable giving option you have is to make qualified charitable donations. This form of charitable giving allows an eligible charity to receive a direct payment from your individual retirement account (IRA). You must be at least 70½ years old to make qualified charitable donations. 

You can transfer up to $100,000 annually without this contribution increasing your income. A qualified charitable distribution also counts towards the required minimum distribution for retirees 72 years old and older.

Special Tax Deduction

Finally, the IRS offers a special tax deduction available for taxpayers choosing the standard deduction. Taxpayers qualify for this deduction if they’ve made cash contributions to qualifying charities during 2021. 

Cash contributions to qualifying charities include contributions made by: 

  • Checks
  • Credit card
  • Debit card
  • Amounts paid by an individual for unreimbursed out-of-pocket expenses for volunteer services to a qualifying charitable donation

Cash contributions to qualifying charities don’t include:

  • Household items or other property
  • Securities
  • Value of volunteer services

You can claim a deduction of up to $300 as an individual or $600 for married individuals filing jointly. 

4. Contribute to 529 Plans 

Fourth, if you haven’t already, you may still contribute to 529 plans. There are two 529 plans: an education savings plan and a prepaid tuition plan. You can contribute to at least one of the two plans in every state and the District of Columbia.

An education saving is the first of the two 529 plans. This plan allows a saver to open an investment account to save for the beneficiary’s future expenses. This includes mandatory fees, room and board, and tuition. You can also use this plan to pay up to $10,000 per year per beneficiary for tuition at public, private, or religious elementary or secondary schools.

A prepaid tuition plan allows you to purchase credits at colleges or universities at current prices for the beneficiary. Prepaid tuition plans cover future tuition and mandatory fees. 

Unlike an education savings plan, you can’t use prepaid tuition plans outside of higher education. You also may not use prepaid tuition plans to prepay for elementary schools or secondary schools.

5. Verify IRA Distributions

Fifth, on your end-of-year tax checklist, you can verify your IRA distributions. This will ensure you’ll remain below the thresholds for the tax year. You’ll also want to verify your distributions early because there’s a deadline to keep in mind.

There are also requirements for RMDs, which you may qualify for if you’re 70½ or 72:

  • If you have a required minimum distribution (RMD) requirement, the requirement has returned for 2021. 
  • If you weren’t the age of 70 ½ in 2019, but you’re 72 years old before the end of 2021, you’ll make your first RMD by April 1, 2022, and a second RMD by December 31, 2022.
  • To avoid two withdrawals in the same year, you may take your first RMD by December 31, 2021.

6. Maximize Tax Deductions 

The sixth item on your end-of-year tax checklist is to maximize your tax deductions. You can receive tax deductions for several business tax deductions, such as:

  • Business travel and meal expenses
  • Car and truck use for business purposes
  • Office expenses and office supplies

Taxpayers should take advantage of every applicable deduction that they qualify for. However, it can get tricky to discern which deductions

7. Consult with an Accountant for Tax Filing Preparation

It isn’t too late to start your end-of-year tax checklist. Starting now will be a great way to get your taxes in order with no worries, and it also gives you time to maximize contributions.

When you need help with your tax filing preparation, make sure you work with professional accountants ready to help you. Work with the pros at 1-800Accountant for your tax filing preparation needs. 

Key Dates for the 2021 Tax Year

Finally, as the tax year ends, you’ll want to remember key dates. These dates will help you know when to expect information as the tax year ends:

  • 12/31/21: Last day to process charitable contributions
  • 1/15/22: Fourth estimated payment for 2021 due
  • 1/31/22: Deadline for employers to send W-2s/1099s to employees
  • 4/15/22: Last day to contribute to qualified retirement plans for 2021

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.