Texas taxpayers might not face changes in state requirements, but the Internal Revenue Service has changes planned for 2021. Taxpayers need to be aware of those changes to remain in compliance. Otherwise, audits and even criminal charges could follow the submission of a return.
Top changes planned for 2021
Tax brackets will change, and all four filing statuses will receive an increase. Tax bracket adjustments derive from inflation figures, so tax obligations may be more in 2021 than 2020 for many filers.
Standard deductions will increase for all filing statuses as well. An increase in the standard deduction amount could result in a reduced amount of tax due.
Employer-sponsored retirement contributions will increase, which might be positive news for those saving for their non-working years. Whether investing in a Thrift Savings Plan, a 401(k) a or 403(b), the combined employer and employee contribution amount will increase by $1,000. The elective deferral amounts remain the same for most people, though.
Learning about the changes in the tax code
Changes might not appeal to everyone, including those wishing to get the most out of their Individual Retirement Account plans. Contribution increases won’t happen, and the deduction amount remains $6,000. Personal exemptions, eliminated in 2018, won’t return. That’s one deduction that taxpayers can no longer rely upon.
Making mistakes on a tax return could create problems for a taxpayer. Itemized deductions receive no caps, but deductions may face inquiries from auditors. False or otherwise improper deductions could even result in legal issues.
Directing questions about IRS tax law to an attorney is a smart plan. A tax attorney may represent a client dealing with the IRS or facing other tax issues in court.