How to Cut Your 2021 Tax Bill
When the Tax Cuts and Jobs Act was signed into law in 2017, proponents said it would make filing taxes easier for millions of Americans. It hasn’t worked out that way.
While the tax overhaul nearly doubled the standard deduction, sharply reducing the number of taxpayers who need to itemize deductions, taxes have become even more fraught for millions of taxpayers. In part, that’s because lawmakers have tweaked the tax code to provide credits and deductions for non-itemizers. Those tax breaks could lower your tax bill but also require more work when it comes time to file.
In addition, as Congress scrambled to prevent the COVID-19 pandemic from torpedoing the economy, it funneled billions in economic stimulus payments through the IRS in the form of tax credits. When you file your 2021 tax return, you may need to reconcile those credits to claim funds you should have received or, in a few cases, pay some of that money back.
We’ll walk you through the tax-filing minefield. We’ll alert you to tax breaks you may overlook, and help you decide whether you should do your own taxes or pay a professional. And we’ll look at whether IRS customer service, which was so bad during last year’s tax filing season that only 10% of taxpayers got through to an IRS representative, will improve for this year’s filing season.
As has always been the case, our first piece of advice is to start early. By now, you should have received all of the documents you need to file, such as your W-2 and 1099 forms from your financial service providers. Filing early means you’ll get your refund more quickly; if you owe money, it’s better to learn that now than on April 18 (this year’s federal tax filing deadline for most taxpayers). It’s also a lot easier to find a qualified tax preparer in February or March than it is in April. And filing early will protect you from outlaws who use stolen personal information to file bogus tax returns so they can claim fraudulent refunds.
Strategies for Non-Itemizers
In the past, non-itemizers who were charitably inclined had to hope that they’d be rewarded in the afterlife, because they didn’t get any tax breaks in this one. But in response to the pandemic, which placed higher demands on
