Extra time on your taxes – what now?

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More time for your taxes - what now?

Question: What about your taxes when you steer a 1000-foot ship through the Suez Canal?

Answer: If you screw it up, a lot of people will notice! Lots!

Why …

The good news and bad news for taxpayers in 2021 are the same: You have 32 additional days (until May 17) to file your federal taxes.

Refunds are likely to be filed as early as possible. Those who will owe something have less incentive to hurry.

In addition to our civic duty, paying our share of democracy, etc., paying the right amount on time is a very real incentive to keep the IRS happy. Nobody wants a federal prison vacation that pays all expenses, which is of course a worse scenario.

So the topic of today’s Your Turn radio show is how to get the most out of the extended tax filing deadline while avoiding problems with the IRS. DC tax attorney Tom O’Rourke will be on hand to answer questions and explain how to navigate over the next few weeks. The show will be streamed live here at 10 a.m. or on the radio in the Washington, DC subway area at 1500 p.m. It is also archived on our homepage for you to listen to again, listen to later, or pass on to a friend in need. In the meantime, Tom gives us this preview of things to think about as you prepare for this very important annual assignment. Remember, if you have any questions for Tom, please send them to mcausey@federalnewsnetwork.com before the show.

Here is Toms’ checklist:

On last month’s show, we talked about how to avoid trouble with the IRS. The last time I performed live on the show (02/17/2021) we were talking about how to avoid trouble with the IRS.

While a common goal is not to have any problems with the IRS, an even more common goal is to pay the lowest amount possible. With the last major tax reform act of 2017, the tax law was changed to remove a number of tax deductions that are claimed by individual taxpayers. Specifically, the dependency exemption has been removed, the state and local income tax deduction has been capped at $ 10,000, and various itemized deductions (union or professional dues, job-related education costs, uniforms, investment fees, and a home office allowance) have been eliminated.

There are still a number of significant ways to save taxes. For federal employees, they only have to look for a number of legally permissible tax saving strategies in their federal benefits package. The main tax saving tools available to federal employees include:

  1. The TSP (either Roth or Traditional).
  2. The Federal Account for Flexible Spending (FSA).
  3. The federal account for people in need of care.
  4. Pay for your health insurance before taxes.
  5. Contribution to a deductible health savings account (HSA). This is only possible if you are registered with a health insurance with a high deductible.

In addition to the tax-saving perks available to all federal employees, there are additional tax-saving options available to all taxpayers regardless of how they earn their income. Some of the most important tax savings are:

  1. The ability to protect up to $ 500,000 in profits from the sale of your primary residence.
  2. Contribute to a traditional or Roth IRA.
  3. Investing in tax-privileged education savings plans, such as a Section 529 plan.
  4. Investing in assets that generate tax revenue (ie tax-exempt bonds).
  5. Investing in assets that generate tax-privileged income such as dividends or capital gains.

With a little thought and planning, most individuals can take steps to ensure they minimize their liability and are in full compliance with tax laws.

Almost useless factoid

By Alazar Moges

Have you ever wondered how fortune got into fortune cookies? The cookies are baked as flat circles. After taking them out of the oven, strips of paper are folded inward while the cookies are still warm and flexible. When the fortune cookies cool, they harden in shape.

Source: Library of Congress