C R Y D E R
P O I N T
MARCH 15
6 common tax myths, debunked
WWW.QNS.COM | MARCH 2021| CRYDER POINT COURIER 15
(BPT)–As you look ahead to doing
your taxes this year, there are a number of
myths you may think are true for the 2020
tax year. If so, you are not alone–tax myths
and misinformation are more common
than you may think. And unfortunately,
these myths can be costly if they lead to
mistakes on your taxes. Here are the top
six tax myths this year:
MYTH 1: ANYONE WORKING
AT HOME CAN DEDUCT
THEIR HOME OFFICE
EXPENSES
Just because you’re working from
home–as many taxpayers are now–
doesn’t mean you can deduct the cost
and expenses of the space used for your
home office. In fact, this deduction only
applies to people who are self-employed.
But, some taxpayers may also be eligible
if they are employed by someone else but
use the space to engage in self-employment
activities.
MYTH 2: YOU CAN CLAIM
DEPENDENT EXEMPTIONS
FOR YOUR CHILDREN
In the past, dependent exemptions allowed
taxpayers to claim deductions for
dependents (such as children) on their
federal tax return. Unfortunately, dependent
exemptions are no longer a thing.
However, dependents are still very important
for tax benefit purposes, including
increased credits, child tax credits, filings
status determination and many more benefits.
Just not a simple tax deduction as in
the past.
MYTH 3: YOU MUST ITEMIZE
TO DEDUCT CHARITABLE
DONATIONS
This was the rule in prior years, but it
changed for the 2020 tax year–you don’t
have to itemize deductions to take a
charitable donation deduction this year.
Under the CARES Act, you can deduct
up to $300 in charitable donations made
to IRS-approved organizations when you
take the standard deduction. But if you do
itemize, you still get to claim the deduction
anyway.
MYTH 4: YOU CAN FILE
TAXES ON A POSTCARD
This is not true. When the tax regulations
were revised, you may have read in
the press about a new “postcard” tax return,
but it was never true. The “form” that
was circulated to be like a “postcard” is in
fact two pages long, plus three schedules!
MYTH 5: YOU’VE ALREADY
PAID TAXES ON YOUR
RETIREMENT DISTRIBUTION
Just because you had taxes withheld
on your retirement or IRA distributions
doesn’t mean you’ve fully paid taxes on
it. This is a very common misconception.
The income and withholding are still reported
on your tax return, along with any
other sources of income you may have,
including Social Security benefits if you
receive them. It’s important to gather all
that information together to discuss with
your tax professional whether you may
still have a tax obligation for 2020.
MYTH 6: THERE’S NO
LONGER A TAX PENALTY FOR
NOT HAVING HEALTHCARE
COVERAGE
While the tax law went into effect in 2020
to remove the federal penalty for not having
health insurance as required under the Affordable
Care Act, you still have a responsibility
to reconcile your advanced premium
tax credit when you have insurance through
your state’s Health Insurance Marketplace.
Plus, some states do charge penalties if
you don’t have health insurance. If you get
healthcare through a marketplace, you still
may get credits and must report it on your
taxes. Ask your tax professional if you need
help understanding your healthcare coverage
as it relates to your taxes.
“If you have questions or concerns
about your taxes this year, don’t wait until
the last minute to get professional help,”
advises Mark Steber, Chief Tax Information
Officer at Jackson Hewitt Tax Services.
“Making errors on your taxes can
cost you both time and money–not to
mention stress and anxiety! Work with a
tax pro who is up-to-date on all the latest
changes and can advise you on your
situation.”
5 tips for financial and
retirement planning in 2021
(BPT)–The past year has presented
countless challenges, and for many, a reassessment
of goals–especially when it
comes to finances. A new survey shows
attitude shifts including a renewed effort
to gain control of finances, especially
through increased saving and getting professional
advice.
Even Americans who did not lose work
lost a sense of confidence in the economy.
The survey by Harris Poll for Empower
Retirement and Personal Capital reveals
a change in attitudes about finances from
April–as the pandemic’s effects were beginning–
to December of 2020. With the
turmoil of the last year, 2/3 of respondents
said they were bracing for financial pain
in the event of future lockdowns, with
44% concerned about losing money on
investments.
Reacting to uncontrollable world
events, one theme emerged: People want
to feel more in control of their own finances,
whatever comes next.
1. Save what you can
There’s no better buffer against unexpected
emergencies–anything from car
breakdowns to job loss–than an emergency
fund. Financial professionals
recommend saving at least three to six
months of expenses to be prepared for
emergencies.
Sound daunting? Start small, and consider
setting up automatic deposits into
a savings account with each paycheck, to
save without thinking about it. Even a few
dollars per pay period can add up over
time.
2. Invest in your family’s future
According to the survey, parents are
concerned about the pandemic’s impact
on their children’s education, but many
believe the crisis will lead to a fundamental
shift in higher education. Nearly
6 out of 10 (59%) expect student loan debt
forgiveness to become more common,
and half believe the pandemic will make
higher education more accessible in the
long term.
If your children are college bound, have
a conversation with a financial professional
or your child’s high school guidance
counselor about how financial aid
works and what strategies may benefit
your family. If you have young children,
look into a 529 college savings plan in
your state, which can provide both tax and
financial benefits.
3. Don’t forget retirement
Whether you’re approaching retirement
age soon or it’s years away, consider taking
full advantage of your employer’s matching
funds for your 401(k) contributions.
Ask your HR department about how to
fully utilize all your available employer
retirement benefits, and increase your
retirement savings percentage now if you
can. Your future self will thank you.
4. Consider your HSA account as part
of your retirement strategy
If your company offers a health savings
account (HSA), remember that any
unused funds can be saved up to be used
during your retirement–adding to your
future financial stability. When you do
need your HSA for medical expenses,
check with your employer to see how it
can best be used. An HSA can help pay
for qualified medical expenses including
prescriptions, medical tests and treatments,
including many vision and dental
expenses.
5. Consult a professional
Given the turmoil of 2020, Americans
are focusing on fundamentals: cutting
spending, increasing savings and safeguarding
investments. Over half the
survey respondents sought financial
guidance related to the election. As uncertainly
continues, an increasing number
are seeking professional help to make
financial decisions and plans.
A financial professional can help you
set priorities and find the best vehicles
for protecting and growing your money.
Ask your employer if your retirement plan
provider offers financial advice through
virtual sessions or phone calls with a professional.
You may also be able to access
digital tools that help you calculate how
close you are to your retirement goals,
along with ways to monitor your investments.
/WWW.QNS.COM
