I don’t know if you get today off or Monday- or both.  But, that makes one of those days the perfect time to take stock of your finances- and maybe find some ways to minimize your taxes.

Given that many of your financial report documents are available electronically, there’s no need to wait for a paper copy to arrive by snail mail. (They won’t be there yet- but you can accumulate year to date figures to prepare for your taxes.) Make an electronic folder for all these forms.  We suggest you put 10 dividers into this folder- which can be a paper folder or an electronic one.    (If you are using paper,  different colors work best so you can keep things organized- or you can use divider tabs.)

#1.  A list of all W-2’s you should be getting.  One from each employer from which you received a pay check. Look at your last paycheck stub(s) and note the gross income and federal and state taxes withheld.

# 2.  A list of all 1099 NEC’s you will be getting from your gig activities- consulting, driving an Uber, providing services, etc.  (The NEC is only for non-employee compensation.)  Total up the amounts you’ve received so far.

#3.  If you are a landlord, a farmer, a real estate broker, then you will also be getting 1099-MISC’s.  Put those documents in this folder (or directory).  Arrange them by box numbers (i.e., the boxes on the 1099 form).   Make a total for each of the boxes on the form.

# 4. A list of all financial industry 1099’s  (these are INT or DIV or B) you will get from every bank account that pays interest, dividends from mutual funds and stocks, stock sales, and mutual funds (typically reporting capital gains and dividends).  The totals are useful, too.

# 5.  A roster of all the K-1’s you will get from partnerships, S entities, LLC’s, REIT’s, etc.  Gross income for the K-1’s should also be totaled. Don’t forget about the 20% QBI (qualified business income) deduction, either.

# 6.  A list of all 1099R’s and W2P’s  for all pension, retirement funds, withdrawals from IRA’s, and 401(k) distributions.  Total them- as well as any taxes withheld.

# 7.  A list of all 1099’s you will get for any unemployment checks, Social Security benefits, and state income tax refunds.  If you didn’t itemize in 2020, you don’t need the state income tax refund numbers; if you did itemize, then the amount of the refund is only taxable to the extent your deduction exceeded the amount of the standard deduction (or the amount of your state sales taxes instead of income taxes).

# 8.  A list of 1098’s received for all mortgage payments.  These should also list the property tax paid for each property.  (If you pay those taxes directly, go to your county/city website and download a record of all payments made this calendar year.)

# 9.   A list of all dates you were away from home on business so the per diem deductions can be determined.  (If you spent the night in a hotel, this is where these should also be recorded.)  I’m guessing there haven’t been too many due to the pandemic of 2020.

# 10.  A list of any IRA or 401(k) contributions made during the year.  This is also where you should write down how much that contribution you’ll be making before you file your taxes.  (It is the maximum allowed by law, right?  And, if you don’t have an IRA,  you do know that you can start and fund one up until the 15th of April- the filing deadline.  Don’t forget!)

# 11.  A list of all estimated tax payments made to the Federal government and to your state taxing authority during the year.   (The normal deadlines is 15 April, 15 June, 15 September, and 15 January- of the next year.)

#12.  The rental payments you received on your rental property (if any).  Plus expenses such as repairs, maintenance, supplies, insurance, condo fees, etc.  Don’t forget to include your mortgage interest and real estate property tax.

Having these lists- and then crossing off each item when you receive or download them- will make it clear when you are able to begin processing your 2020 tax returns.

Now, total up your income (but only the net from Schedule C self employment, net rental income from Schedule E, and net income from your farm).  Use the standard deduction and the itemized deduction numbers.  Check to see where that puts you on the tax bill.   If you just exceed a tax bracket, then you should consider selling stocks that have losses- that could reduce your income by $ 3000.  (If you had stock gains, you should sell stocks that have losses that will exceed your gains by $ 3000.)

2021 Tax Rates

Et voila.  You are ready to file your taxes and pay a reasonable amount of tax.  If you want to pay the lowest amount, we are ready to handle your needs.

To those so celebrate- Merry Christmas.  To those that also add this- Happy Kwanzaa.

If you’re Jewish, the next holiday isn’t for a few more weeks.