Spencer R. Martin, CPA

'Tis the Season for Important Tax Paperwork

Keeping your records organized will help make sure you don't miss out on valuable deductions when it is time to file. Many taxpayers will receive year-end income statements from employers, banks, stock issuers and other sources in January and early February.

The most common documents include:

- W-2 forms from your employers, showing your wages and any taxes withheld
- Forms 1099-INT and 1099-DIV showing your interest and dividend income
- Forms 1099-MISC and 1099-NEC showing gig economy and other self-employment earnings, along with rents, royalties and other miscellaneous income
- Form 1099-K from payment processing services like PayPal and CashApp if you received $600 or more in payments through one of these platforms for goods or services
- Records of virtual currency (including crypto) transactions
- Charity donation receipts
- Health Insurance statements (like Form 1095)
- Proof of qualifying educational expenses (like Form 1098-T)
- Mortgage interest statements

Giving Tuesday and Charitable Donations - Did You Know?

Millions of Americans will contribute to their favorite charities on Giving Tuesday (November 29), and throughout the holiday season. Charitable donations are often described as tax-deductible, but whether you can claim a deduction for your contribution depends on several factors.

First, you generally must itemize deductions on your tax return to claim a deduction for charitable donations. Therefore, your donation will not be deductible if you use the standard deduction. Note that the special rules that allowed taxpayers who did not itemize to deduct certain monetary donations in 2020 and 2021 have now expired. A tax professional can help you determine whether itemizing deductions would be advantageous for you.

If you do itemize deductions, you may generally deduct donations of money or property to any eligible tax-exempt charity. If you are unsure whether an organization qualifies to receive tax-deductible donations, the IRS Tax-Exempt Organization Search tool (link below) can help.

Tax-Exempt Organization Search: https://www.irs.gov/charities-non-profits/tax-exempt-organization-search

Reasons to File a 2021 Federal Tax Return

Some taxpayers are not required to file federal tax returns, generally because their income falls below the filing threshold. However, choosing not to file a return may mean missing out on a tax refund. Therefore, the IRS urges all Americans who may qualify for a tax refund to file a 2021 return by the extension filing deadline of October 17, 2022 or earlier if possible.

Even if you had no tax withheld from your pay in 2021 and made no estimated tax payments, you may still be entitled to a refund if you qualify for certain federal tax credits, including:

Recovery Rebate Credit: If you were eligible for a third economic impact payment (EIP, also called a stimulus payment) in 2021, but did not receive it or got less than the full amount, you may be able to claim this credit.
Earned Income Tax Credit (EITC): Working taxpayers who had $57,414 or less in 2021 income may qualify for this credit, depending on their filing status and number of dependents. For those with dependents, the credit amount can be as high as $6,728.

Both of these credits are fully refundable, meaning that if you qualify, you may receive the credit as an IRS refund even if you owe no tax for 2021.

Child Tax Credit (CTC): You may be eligible for this credit if you had a qualifying child of age 17 or younger in 2021.
American Opportunity Tax Credit (AOTC): You may qualify for this credit if you, your spouse, or your dependent was enrolled at least half time at an institution of higher learning (such as a college, university or trade school) in 2021.

The CTC is fully refundable, while the AOTC is partially refundable.

You may also be eligible for a federal tax refund if your employer(s) withheld taxes from your paychecks, or if you made estimated tax payments at any time in 2021.

Deductions and Credits for Homeowners and New Home Buyers – Did You Know? (2/2)

Home ownership can provide a number of tax benefits. To make the most of these tax-saving opportunities, homeowners should familiarize themselves with the IRS rules on which expenses can and cannot be deducted.

In addition to home mortgage interest and mortgage insurance premiums, homeowners may generally deduct state and local property taxes. However, property tax deductions are subject to the general $10,000 deduction limit for state and local taxes. Also, in order to deduct property taxes, you must itemize deductions on your return, rather than taking the standard deduction.

Non-deductible home ownership expenses include utilities, repairs, insurance (other than mortgage insurance), most closing costs, depreciation, homeowners' association fees, and payments on the principal of a mortgage loan. A tax professional can help you determine which of your expenses you may deduct, and how to figure the deduction amounts.