It’s tax season, which means you have to do two things.
1) Remember a lot of boring, administrative details that you would otherwise never think about. 2) And figure out how you can get the government to give you as much money as possible in return for paying The Man throughout the year.
Maybe you’re one of the millions of Americans who file taxes online at this point. Even if you are, it’s still helpful to hear from real humans who think about this process the same way you do, but who just know a little bit more about the tax code.
They are here to help. Here’s what they say you need to remember when filing your taxes in the coming months.
Don’t try to claim the child tax credit twice.
President Joe Biden signed the American Rescue Plan Act into law in March 2021. As part of that law, Americans with children could receive an advance on their child tax credit for the year.
If you received said advance, according to Eric Seidman, a partner at Wouch, Maloney & Company in Horsham, you cannot claim that money again. Whatever you received in advance, say $1,500, you must now subtract from the total that you are owed, say $3,000, from the child tax credit.
“When you file for 2021, it may default to give you the entire child tax credit,” Seidman said. “But if you received money in advance, you have to do a reconciliation.”
For individuals, Seidman called the child tax credit situation “the single biggest headache” that he’s foreseeing this year.
If you’re a regular American, use TurboTax.
For the 2020s, I’m what you would consider a regular American. I have no kids, no business and no complicated web of investments.
Therefore, I don’t need to pay an accountant to offer me tax advice. I can just have TurboTax walk me through it on some winter night when the Sixers aren’t playing, and I truly have nothing else to do.
“Do your own tax return unless it’s more complicated, and, if it is more complicated, seek a professional,” said a professional, Barry Avrach, the president of Avrach & Co. PC in Philadelphia.
If it is more complicated, as Avrach explained, you want to find a way to take advantage of the tax laws. Guys like Avrach know how to do that.
With cryptocurrency, the fun is over.
Bitcoin, ethereum and others are now on the grid to the point of having Matt Damon commercials, NBA jersey ads and Uncle Sam’s attention.
According to Dana Newsome, a partner with The Focus Group PC in Philadelphia, you now have to report cryptocurrency assets as part of your tax filing. Those investments are classified as property, Newsome added.
Retail investment apps like Robinhood make it easy for anyone to get involved in the crypto market, the accountant explained. So the market has grown exponentially in recent years, forcing the government to play its customary role of casino security against the big winner at the table.
“Now they finally started to develop some rules and regulations because it’s become so ubiquitous,” Newsome said. “They need to regulate the purchases and sales.”
However, even though the wild, unregulated fun may be over, there is still a way to ensure that the government takes the least amount of money from you as possible. Newsome, like a true accountant, knows the trick.
What’s the highest price you paid for a crypto asset in the tax year 2021? Whatever that answer is, list it as the baseline for the crypto sales you made throughout the year.
“That would decrease the amount of gain you have to report,” said Newsome.
In doing so, it would also decrease your tax liability for crypto assets.
Keep accurate records of your income.
Joanne Bryson, a sole practitioner CPA in East Norriton, said a lot of her individual and business clients lost track of all the federal stimulus money they received earlier in the pandemic.
From stimulus checks to unemployment payments to Paycheck Protection Program loans, it was a lot, it was immediately helpful and it wasn’t normal. So, people forgot to count the money as part of their regular income.
But if you got extra money, you may need to answer for it in your tax filing. If you only received a stimulus check, a service like TurboTax will walk you through how to file that.
But if you got a more complicated set of payments, like extended unemployment benefits or business loans, you may want to talk to someone like Bryson.
“Doing estimated taxes can be difficult for people in this environment,” Bryson said. “I can’t say that any of my business clients had normal income in the past year.”
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