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BELLEFONTE -- Completing tax documents can be quite stressful but there are ways to ease that tension. "Don't procrastinate," offers Brenna Shutika, who is chief operating officer of Dotts Hamilton, Inc. in Bellefonte. She added,"Rely on your tax professionals. Our tax professionals are available year-round and willing to help with any potential tax concern a client has and help them plan for the upcoming filing season."
Before you book that appointment, Shutika gave a breakdown on what to expect and how to prepare before you see your tax professional.
EXPRESS: What basic documents are necessary to prepare your taxes?
SHUTIKA: There are standard documents that most taxpayers are familiar with -- W-2's, 1099-R's, Form SSA-1099 (Social Security), 1099-G (Unemployment), 1099-INT (interest received), but each year the list of needed documents could change. For instance, this year tax professionals are asking for letter 6419 from the IRS regarding the Advanced Child Tax Credit received in 2021, letter 6475 which reports the amount from the third round of Economic Impact Payments the taxpayer received in 2021, and any cash charitable donations as most taxpayers can take an above the line deduction for cash charitable donations up to $300 for single taxpayers ($600 for married filing joint). For taxpayers operating a business, we will want to know if they received any Employee Retention Tax Credit, PPP Forgiveness, Grants, or any other COVID-19 Tax Credits.
EXPRESS: What are the most common documents taxpayers forget to include with returns?
SHUTIKA: This varies among taxpayers, but typically brokerage statements (1099-B). Brokerage statements have a deadline of February 15th, where all other documents have a deadline of January 31st. In addition, Pennsylvania has the PA Property Tax/Rent Rebate for older PA residents which requires copies of paid real estate tax bills to be submitted with the PA-1000 Form. Many taxpayers forget to include their paid real estate tax receipts.
EXPRESS: Are all senior citizens exempt from filing?
SHUTIKA: Absolutely not. It all depends on their sources of income. Most taxpayers believe social security income is tax-exempt, but it isn't always.
EXPRESS: Is there anything freelancers or gig workers should know about filing?
SHUTIKA: Understand self-employment taxes and keep a record of all income and expenses associated with the work.
EXPRESS: Are there any new tax changes for dependents?
SHUTIKA: The child tax credit increased for 2021 to $3,600 per child under 6 and $3,000 per child under 18. Of course there are income limitations on this. There was also a huge increase in the dependent care credit as well.
EXPRESS: When is it necessary to file an extension?
SHUTIKA: When a taxpayer needs more time to gather the appropriate information to complete an accurate return. (Keep in mind,) an extension to file isn't an extension to pay.
To get ahead of next year's taxes, Shutika said that you can start right now by creating a file for taxes. She explained, "Add documents to the file as they arrive."