Summer is here, but taxes never end. Here are a few recent tax questions for 2021 and updates we want you to be aware of:
If you are age 72 or older, you must take annual required minimum distributions (RMD) from traditional IRA’s and 401(K) plans. The 2020 exclusion to this rule does not apply to 2021 and going forward. Be sure to make these distributions this year.
If you are age 70 ½ or older you can transfer up to $100,000 yearly directly to qualified charitable organizations. This distribution counts towards your RMD, but they are not taxable and not included in your adjusted gross income. It’s much better to use this than to report as an itemized deduction on Schedule A of your tax return. Keep in mind the distribution must go directly to the charity. You cannot receive the distribution and then donate to charity for this to qualify. Transfers to donor-advised funds do not qualify for QCD treatment.
You’ve probably read about the possibility of increased capital gains rates. While this initially is targeted to taxpayers with incomes of $1M or more you may think this will never apply to you. But what if you are selling your company’s stock and retiring? Do you have stock options with sizable gains?
When you sell online such as PayPal or Amazon and receive $600 or more (starting in 2022) you will receive form 1099-K that reports the income to the IRS. There are slightly different rules for 2021. This income must be reported on your tax return. How does this affect you? Many people use these platforms as the new “garage sales”. An example might be if you tire of your exercise equipment and sell the equipment online. If you receive $600 or more, you will need to report the income and have tax due
This tax season we are seeing an increased number of delayed refunds, some up to several months. The IRS says they are checking amounts reported for stimulus payments and other verification measures. As preparers, we have no additional resource to check on the status of your refund other than using the IRS’s “Get your refund status” on their website. This adds even more questions to ask. We can verify the return has been electronically filed and accepted, but not as to the status of the refund.
At David Mills, CPA, LLC our experts can help answer your tax questions for 2021. Contact us online or call (309) 266-5700.