What you can do to stay prepared for another tricky tax year

LEXINGTON, Ky. (WKYT) - The 2020 tax season may only be a few months in the past, but it’s not too soon to start looking forward to next year’s return. With the effects of COVID still impacting the economy in the form of tax credits, remote work, and more, 2021 is shaping up to be another tricky tax year. Independent retirement planner Josh Smith joined us on the newscast to discuss this upcoming tax year and how you can prepare for it.

“This tax season is the third year of complex effects from the pandemic, including tax changes, life changes, and society changes,” said Josh Smith. “A number of factors will make 2021 tax returns more complicated than average.”

One of those factors is the third stimulus payment that started going out in March. Though the stimulus payments aren’t considered taxable income, if taxpayers include them as income they will end up paying more in taxes and will ultimately need to request a refund. The advance child tax credits will also be something families will need to be aware of when filing.

“Taxpayers have never received advance payments of tax credits that go on their tax return,” said Smith. “It is something you’ll need to account for.”

Two key things he mentions that you can do right now before tax season rolls around are to do a mid-year tax checkup and to stay on top of important documents and information. He recommends that filers keep track of everything that happened to them this year.

“Start your list of things that might change your tax return and either learn about them on your own at tax time or tell your tax pro,” said Smith. “You cannot give enough attention to the things that happened to you during these past few years.”

If you are looking to pursue an encore career, consider discussing with a financial planner to ensure it won’t hurt you financially. To see additional stories surrounding business and economic news for the Lexington area, visit https://www.WKYT.com/MoneyMatters/ and if you have a question for Josh send an email to info@swdgroup.com.

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