Wolters Kluwer: It’s time for taxpayers to prepare for the next tax season

Wolters Kluwer Taxation and Accounting examines year-end steps to consider that could impact your 2021 tax return.

What: Most of the steps available to taxpayers that affect their 2021 tax return must be completed before the end of the year. Areas of interest often include speeding up deductions, deferral of income, reviewing investment portfolios for possible realizations of capital gains or losses, charitable giving and lifetime giving to members. of the family.

However, the 2021 end-of-year planning might look a little different. The American congress Still envisioning a broad set of tax changes that could raise taxes in 2022 for wealthier taxpayers while potentially lowering taxes for low- to middle-income taxpayers. Known as the Build Back Better Act, details are still subject to substantial change as lawmakers strive to cut costs by around $ 3.5 trillion around 2,000 billion dollars. It is possible that an agreement will not be reached until very late in the year.

Why: If and when the Build Back Better bill is enacted, it might be too late to do year-end planning in response. Some of the provisions may come into effect on the enactment date, others, such as changes to the capital gains rate, could be retroactive and already too late for planning, and some could come into effect as of 2022 or later. late. Taxpayers would likely benefit from talking to their tax professional and accountant about any year-end changes that might make sense to them. Here are some things taxpayers might want to consider:

All taxpayers may want to consider year-end charitable giving to take advantage of the $ 300 deduction for those claiming the standard deduction or limit of 100 percent of adjusted gross income on those who itemize deductions; both provisions currently expire at the end of this year

Taxpayers may want to consider what might be their last chance to make Roth IRA conversions, although American congress could possibly modify the administration’s initial proposals and keep Roth conversions for a longer period to increase their projected revenues

With possible inheritance and gift tax changes, including reducing the exemption amount and eliminating the benefits of assignee trusts and valuation discounts, the end of the year would be a good time for taxpayers to revisit their estate plans and possibly consider end-of-year lifetime gifts.

With a possible significant increase in IRS funding to improve tax return verification rates, taxpayers may want to ensure they have documentation to support all deductions and credits on their tax returns

While capital gains rates may increase for wealthier taxpayers, the current proposed effective date is September 13, 2021, which potentially already makes it too late to plan ahead for the new rules

Intermediate business owners should consider reviewing possible changes to the 20% deduction for qualifying business income, rejection of excess business losses, changes to the taxation of deferred interest and a set significant changes to the taxation of partnerships.

Richer taxpayers may want to consider accelerating income rather than the usual deferral of income

Richer taxpayers may also consider deferring deductions rather than the usual acceleration of deductions.

Who: Tax expert Marc Luscombe, JD, LL.M, CPA, Senior Federal Tax Analyst, for Taxation and accounting Wolters Kluwer, can help discuss issues taxpayers might want to consider in year-end planning.

PLEASE NOTE: These documents are designed to provide accurate and authoritative information regarding the topic being discussed. The information is provided with the understanding that Taxation and accounting Wolters Kluwer is not engaged in the provision of tax advice or accounting, legal, tax or other professional services.

Contact: To arrange an interview with Marc Luscombe or other federal and state tax experts from Wolters Kluwer Taxation and Accounting on this or any other tax subject, please contact Bart Lipinski.

About Wolters Kluwer

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