Your 2021 Tax-Preparation Checklist

By Paul Fenner, CFP®, ChFC®, CRPS®

With the challenges we've faced in the past year, thinking about taxes may not be at the top of your mind. However, being well-prepared for tax season can help you alleviate stress and focus on what you love. To ensure a smooth tax-filing experience, we have created a comprehensive 2021 Tax-Preparation Checklist to help you gather all necessary documents and stay organized.

Gather Your Personal & Income Information

You’ll probably start receiving various tax documents in the mail or virtually soon, so instead of letting them sit in a pile on your counter, create an organized system for the following.

Income Information

• Form W-2: These are issued by employers and show your wages and tax withholdings. They are supposed to be mailed by January 31.
• Form 1099-MISC: These report income you have received as an independent contractor or freelancer. You should receive one from each person or company that pays you.
• Form 1099-INT: This form will show any interest you have earned.
• Form 1099-R: This form reports income received from annuities, IRAs, or pensions.
• Form 1099-DIV: Any dividend income you earn is reported on this form.
• Form 1099-B or 1099-S: You will receive these if you have any income from the sale of property or stock.
• Form 1099-C: This form reports any debt you had cancelled in 2020. 
• Form 1099-G: In a year where unemployment was rampant, many people will receive this form, which shows unemployment income or state and local tax refunds.
• Form SSA-1099: If you receive funds from Social Security, you will receive this form. 
• Form 1098: You will get this from your mortgage company reporting the interest that you paid.
• Form 1098-T: This reports payments of qualified tuition and expenses.
• Form 1095-A or 1095-C: These forms report your healthcare coverage for the year and your premium tax credit, if applicable.
• Schedule K-1 (Form 1065, Form 1120S, or Form 1041): This reports income for a partner, a shareholder, or an income beneficiary of an estate or trust. The Schedule K-1 normal deadline can be as late as April 15th. 
• Alimony you received
• Business income
• Rental property income and expenses

Income-Reduction Documents

• Form 1098-E for student loan interest paid, or loan statements for student loans received
• Form 1098-T for tuition paid or receipts from the institution you or your dependents attend
• Receipts for any qualifying energy-efficient home improvements
• Form 5498: Records of IRA contributions made during the year
• Form 8606: Roth conversions or IRA rollover information 
• SEP, SIMPLE, and other self-employed pension plan information
• Records of medical savings account (MSA) contributions
• Moving expense records
• Receipts for any qualifying energy-efficient home improvements
• Self-employed health insurance payment records
• Alimony you paid

Personal Information

If you want your tax-filing experience to be painless, you’ll also want to make sure that you have all of your and your dependents’ personal information available, such as: 

• Social Security numbers and birth dates
• Copies of last year’s tax return (helpful, but not required)
• Bank account number and routing number, if you wish to have your refund deposited directly into your account

Organize Your Documents For Itemization

Also, if you itemize your deductions, you’ll need records to include your totals and provide proof. 

Deductions And Credits

• Child care costs: provider’s name, address, tax ID, and the amount paid
• Education costs: Form 1098-T, education expenses
• Adoption costs: SSN of the child; records of legal, medical, and transportation costs
• Form 1098: Mortgage interest, private mortgage insurance (PMI), and points you paid
• Investment interest expenses
• Charitable donations: cash amounts and official charity receipts
• Medical and dental expenses paid
• Casualty and theft losses: the amount of damage, insurance reimbursements
• Records/amounts of other miscellaneous tax deductions: union dues; unreimbursed employee expenses (uniforms, supplies, seminars, continuing education, publications, travel, etc.)
• Records of home business expenses

Taxes Paid

• State and local income tax
• Real estate tax
• Personal property tax

Consider Possible Changes

Okay, so that’s the nitty-gritty of what you’ll need in front of you to thoroughly fill out your tax return. But there are also a few things to think about that could impact how you file, such as any changes that have occurred this year. Did you add another child to your family? Did one of your children start college? Did you start taking withdrawals from a retirement account? All of these changes need to be reflected on your tax return but won’t show up on prior returns.

More than personal changes, there may be changes to federal or state tax law that you should be aware of. The Tax Cuts and Jobs Act tax reform bill of 2017 is still being implemented, and the new SECURE Act could also affect your 2020 tax situation. 

Specifically, you should stay on top of annual changes to retirement plan contribution limits. For the 2020 tax year, you can put up to $6,000 in any type of IRA. If you are over age 50, that amount goes up to $7,000 thanks to the $1,000 catch-up contribution. Annual contribution limits for 401(k)s, 403(b)s, the federal Thrift Savings Plan, and most 457 plans also increased by $500 for 2020. The new annual limit on contributions is $19,500. If you are 50 or older, your yearly contribution limit goes up to $26,000. And if you are eligible to contribute to an HSA, you can save $3,550 if you have single medical coverage and $7,100 if you are covered under a qualifying family plan. If you are 55 or older, those limits go up another $1,000. Keep in mind that for IRAs and HSAs, you have until April 15th, 2021, to contribute for the 2020 tax year. 

A knowledgeable financial professional can help you understand any tax law changes and how they affect you.

Make A Plan For The Future

While it’s important to get your 2020 tax return filed properly, it’s just as important to look at the bigger picture of taxes in general. Are you optimizing all of the tools available to you to limit your tax liability? Are there steps that you could take now to minimize future taxes? Do you have a plan for your tax refund that will further your overall financial goals?

Taxes are complicated, to put it lightly, so it helps to work with a professional who understands them if you want to maximize the opportunities available. An experienced financial professional can help you with tax planning in light of your overall goals and financial plan.

If you want to be proactive about tax planning and you don’t have a trusted advisor yet, our team at TAMMA Capital would love to help you experience confidence in every aspect of your financial plan. Schedule a free discovery meeting to learn how we can help you minimize your taxes and make the most of your hard-earned money. 

About Paul

Paul Fenner is founder and CERTIFIED FINANCIAL PLANNER™ (CFP®) at TAMMA Capital, a Family Office providing personalized wealth planning, portfolio management, and tax  services under one umbrella to help reduce the multiple financial and lifestyle pressures facing your family. As a father of four children, including a set of triplets, Paul specializes in partnering with families to help them navigate life transitions and plan for the future to help provide peace of mind. Paul has 22 years of experience and earned a bachelor’s degree from Adrian College and an MBA from the University of Findlay. He also holds the Chartered Retirement Plan Specialist (CRPS®) and Chartered Financial Consultant® (ChFC®) designations. To learn more about Paul, connect with him on LinkedIn.