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Some important things before the end of your tax year 2021

Updated: Jan 15, 2022

The IRS reminds taxpayers there are things they should do before the current tax year ends on December 31.

  • Check Individual Taxpayer Identification Number (ITIN) - If your and your spouse' Social Security Numbers were not used for your tax returns, check if an ITIN is needed for you and/or your spouse, and if the ITIN needs to be renewed.

  • Donate to Charity

    • The law now permits taxpayers to claim a limited deduction on their 2021 federal income tax returns for cash contributions they made to certain qualifying charitable organizations even if they don't itemize their deductions. The maximum deduction is $600 for married individuals filing joint returns or $300 for singles and married individuals filing separate returns.

    • Eligible cash contributions made by taxpayers who itemize deductions in 2021 is now allowed to be applied up to 100% of their AGI. Qualified contributions are cash contributions to qualifying charitable organizations.

    • Limits for charitable cash contributions and certain food inventory donation by businesses are also increased in 2021.

  • Find information about retirement plans

    • Maximize your contribution to your IRA accounts. The contribution limit to all of your traditional IRAs and Roth IRAs for 2021 is $6,000 ($7,000 if you're age 50 or older), or, if less, your taxable compensation for the year.

    • Contribute salary deferral - Taxpayers can make a salary deferral to a retirement plan. This helps maximize the tax credit available for eligible contributions. Taxpayers should make sure their total salary deferral contributions do not exceed the $19,500 limit for 2021.

    • Required minimum distributions (RMDs) - Individuals who reached 70 ½ in 2019, (70th birthday was June 30, 2019 or earlier) did not have an RMD due for 2020, but will have to take one by Dec. 31, 2021. Individuals who reach 72 in 2021 (and their 70th birthday was July 1, 2019 or later) have their first RMD due by April 1, 2022.

  • Check on advance child tax credit payments - In January 2022, the IRS will send Letter 6419 with the total amount of advance child tax credit payments taxpayers received in 2021. Sum up the payments you received and compare to the IRS letter.

    • Taxpayers who received less than the amount for which they're eligible will claim a credit for the remaining amount of child tax credit on their 2021 tax return.

    • Eligible families who did not get monthly advance payments in 2021 can still get a lump-sum payment by claiming the child tax credit when they file a 2021 federal income tax return next year. This includes families who don't normally need to file a return.

    • Review more FAQs on 2021 child tax credit payments

  • Economic impact payments and claiming the recovery rebate credit - Individuals who didn't qualify for the third economic impact payment ($1,400/person) or did not receive the full amount may be eligible for the recovery rebate credit based on their 2021 tax information. In early 2022, the IRS will send Letter 6475 that contains the total amount of the third economic impact payment and any plus-up payments received. People should keep this and any other IRS letters about their stimulus payments with other tax records. Individuals can also create or log in to online account to securely access their economic impact payment amounts. Note that the IRS issued frequently asked questions (FAQs) for the 2021 Recovery Rebate Credit.

  • Consider estimated tax payments - Individuals who receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits and in some instances, pension and annuity income should make quarterly estimated tax payments. The last payment for 2021 is due on Jan. 18, 2022.

  • Report virtual currency transactions on Form 1040 - If you received, sold, exchanged or otherwise disposed of any financial interest in virtual currency during 2021, you will have to report these transactions.

  • View account information online - Individuals who have not set up an Online Account yet should do so soon. People who have already set up an Online Account should make sure they can still log in successfully. Taxpayers can use Online Account to securely access the latest available information about their federal tax account.

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