Last-minute tax tips for insurance agents

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Just starting your taxes? Here are 14 last-minute tax tips for insurance agents

  1. Federal taxes are due May 17 this year; state taxes have varying due dates, so check your state’s deadline.
  2. Get your receipts, files, documents organized.
  3. Once you view all your deductions, decide if you want to itemize or take the standard deduction.
  4. Don’t forget all these credits and deductions that you may be eligible for.
  5. Avoid last-minute mistakes; file online if possible.
  6. Avoid these top tax scams.
  7. Now prepare for 2021 taxes with these two tips.

If you’re like many Americans (1 in 3, to be exact), you’re likely putting off submitting your taxes until this year’s deadline. Some may call it procrastination; others prefer to call it “working under pressure.” However you choose to define waiting until the eleventh hour, help ease last minute scrambling with these 14 last-minute tax tips for insurance agents:


1. Get organized.

This one’s a no-brainer, that’s true. But how many times, after you’ve finished your taxes at the eleventh hour, have you vowed that next year, you’ll be more organized?  One tip is to keep a photo file on your smart phone of any documents, receipts, etc. that you’ll need for taxes. When that item comes in the mail, or you have the receipt in hand, just shoot an image and file it away on your phone. Then periodically back up your phone’s photos so that you don’t lose anything. This doesn’t negate the need to keep hard copies, but at least you’ll know what the document looks like when you begin searching for it.


2. Locate and compile all required documents.

Dig through that pile of mail, file folders, and desk drawers to locate the following forms:

  • W-2s—from your employer(s)
  • 1099s—for independent contractors
  • 1099-INT—for interest earned on things like a savings account
  • 1098—for mortgage interest statement on a home loan
  • Receipts—from any business, healthcare, and education purchases or payments

Another idea is to download a tax prep checklist. There are several online; here’s one from TurboTax to help you organize all your paperwork.


3. Make a deduction checklist.

It’s tempting to try to remember deductions off the top of your head when in a rush to file your return. That’s why we’re adding this in our last-minute tax tips for insurance agents. Writing them down in advance will help you avoid overlooking anything that could result in a write-off. Plus, having a dollar figure next to each item in your list helps you decide whether to itemize deductions or just take the standard deduction.

What’s deductible this year alone vs. spreading out the deduction among future years as a depreciable expense can greatly impact your decision for software as well as tangible assets purchase decisions. There may be bonus depreciation deductions available this year. Consult your tax professional for more information.

Related: Year-end tax strategies for insurance producers


4. Claim your dependents.

TurboTax says some tax filers try to claim their children as dependents without including their social security numbers. It won’t work. The IRS will deny the $2,000 child tax credit for each child under age 18. (Note: The child tax credit is phased out at higher income levels. The credit is reduced to zero in stages as income rises above $400,000 on joint returns, and above $200,000 on single and head of household returns.)

Be careful if you are divorced, because only one of you can claim your child as a dependent. TurboTax says the IRS has been checking closely lately to make sure spouses aren’t both using their children as a deduction. If you forget to include your children’s social security numbers, or if you and your ex-spouse both claim the same child, you will most likely halt the processing of your return (and any refund you’re expecting) until the IRS contacts you for clarification and proof.

Be sure to file for your brand-new baby’s social security card right away so you have the number ready at tax time. Many hospitals will do this automatically for you. Rather than filing your return without the baby’s social security number because you don’t have it by the deadline, the IRS says it’s best file for an extension.


5. Did you receive a state tax refund last year?

According to Kiplinger, there’s a line on the tax form for reporting a state income tax refund. Most people who get refunds can simply ignore it, even though the state sent the IRS a copy of the 1099-G you got reporting the refund. If you claimed the standard deduction on your previous federal return, the state tax refund is tax-free.

But even if you chose to itemize deductions on your last return, part of your state tax refund still might be tax-free. It’s taxable only to the extent that your deduction of state income taxes the previous year actually saved you money. If you would’ve itemized even without your state tax deduction, then 100 percent of your refund is taxable, because 100 percent of your write-off reduced your taxable income. But if part of the state tax write-off is what pushed you over the standard deduction threshold, then part of the refund is tax-free. Don’t report any more than you have to, Kiplinger says.


6. Charitable contributions

In your 2020 taxes, you can deduct up to $300 for charitable donations, even if you don’t itemize. You can also write off out-of-pocket expenses incurred while doing work for charities, such as 14 cents per driven mile, ingredients for meals you brought to a soup kitchen, and more.

Related: Small business financial and tax tips


 7. Do you qualify for these credits?

“A credit is so much better than a deduction; it reduces your tax bill dollar-for-dollar,” says Kiplinger.   So make sure to file every credit for which you’re eligible, such as

  • Childcare credit. You may qualify for a tax credit worth between 20 – 35 percent of what you pay for childcare while you work.However, if your company offers a childcare reimbursement account allowing you to pay for childcare with pretax dollars, that’s likely an even better deal. Kiplinger provided this example: if you qualify for a 20 percent credit but are in the 24 percent tax bracket, the reimbursement plan is your best choice. Because your reimbursement account is funded with pre-tax dollars, you avoid paying federal taxes and 7.65 percent federal payroll tax on this amount. (Only amounts paid for the care of children younger than age 13 are eligible.)
  • Higher education credit. If you, your spouse or dependents had higher education costs last year, you may see some tax savings through the Lifetime Learning credit. It’s worth up to $2,000 a year, based on 20 percent of up to $10,000 you spend for classes that lead to new or improved job skills. Even costs for continuing education credits are deductible, but there are income limits ($59,000 – $69,000 for individual and $118,000 to $138,000 for couples filing jointly).


8. Turn losses into wins.

When itemizing deductions, don’t forget to include realized capital losses, such as stocks sold for less than the price you bought them, mortgage or home equity loan interest, student loan interest, and business loans or lines of credit interest—all of which are deductible to varying degrees.


9. Contribute to an IRA, 401(k) or HSA.

Contributions to an IRA, 401(k) or HSA are both tax-deferred and tax deductible, and you have until May 17 to make a contribution that counts towards 2020 taxes.

Related: Top 10 tax tips for small business clients


10. Had a lean year? See if you qualify for EITC.

The IRS says 20 percent of workers fail to claim this valuable earned income tax credit. Whether this is your first year in the business and you’re still building your book, or you just had a lean year, you may qualify.  If you worked but earned less than $53,330 with two kids in 2020, use the IRS’s EITC Assistant tool to see if you qualify. Here’s a chart that will help:


11. Avoid last minute mistakes.

It’s easy to make rookie mistakes when in a hurry, but even the smallest of errors can result in a filing delay. Be sure to look your return over for simple math errors, incorrectly entered addresses or social security numbers, and to ensure you signed on all the dotted lines.


12. Watch out for scammers.

Tax season brings all kinds of shady characters out of the woodwork who grow increasingly clever in their schemes. Check out some of the most common tax scams this season below, and make sure you’re protected with a free 24/7 credit monitoring service and making a point of not giving out any personal financial information to just anyone. Take a look at this IRS warning of the “Dirty Dozen” tax scams for 2020.


13. Before you file: Two more important tax tips for insurance agents

  • Protect your identity. If you received an Identity Protection PIN, or IP PIN, in the past, then you must provide this number on your tax return not only this year but on all future tax returns, says An IP PIN is a six-digit number assigned to eligible taxpayers that helps prevent fraudulent returns from being filed under your Social Security number. However, this IP PIN changes every year. You should receive your new IP PIN in the mail; if not, you’ll need to go to the IRS website to retrieve it.
  • How and when to file. Electronic filing works best if you expect a tax refund. Because the IRS processes electronic returns faster than paper ones, you can expect to get your refund three to six weeks earlier. If you have your refund deposited directly into your bank account or IRA, the waiting time is even less. If you owe money, you have several options: you can use IRS direct pay from your checking or savings account. Or you can file electronically and then wait until the federal tax deadline to send your check.

IRS lists 9 common filing errors to avoid when submitting your forms, everything from misspelling your name or forgetting to sign the forms, to having an expired ITIN (individual tax identification number) or incorrect bank account numbers. It’s a good checklist of tax tips for insurance agents to skim just before you hit “Submit.”


14. Request an extension.

About eight million Americans file for a tax extension each year. If you happen to fall into that category this season, use Form 4868 available on the IRS website. Extensions are generally granted automatically, and you do not need to explain the reason behind your request. The one requirement is that you request by no later than midnight on May 17. To be clear, requesting an extension is not requesting an extension of time to pay taxes, so be sure to pay as much as possible of your owed balance.

No matter your reason for procrastinating—ahem, “working under pressure” these tax tips for insurance agents can make doing your taxes – well, less taxing.  Use these tips to prepare as much as possible within the available timeframe to avoid seasonal panic. Then sit back and enjoy spring (and hopefully a return as well!)


Take these steps to prepare for your 2021 taxes – now!

insurance agent tax tips

1. Determine if you need to adjust withholding.

While admittedly this won’t help you with 2020 taxes, it can help significantly next year. By looking at what you made and what you owe for last year, you can see if you’re overpaying or underpaying by a goodly amount. You’ll need to complete the form W-4, Employee’s Withholding Allowance Certificate, to adjust the amount withheld, and turn in to your HR group.

2. Ramp up your savings contributions.

If an HSA, FSA plus an IRA or 401(k) or other retirement savings vehicle is available to you, take advantage of it. These are tax-deferred accounts, meaning they’re not included in the taxable amount you’ll owe next year.

In working with your tax preparer, ask him or her to give you a couple different scenarios: What if you add an additional $2,000 or $4,000 to your contributions – how will this affect your taxes owed? For 2020, the maximum Roth IRA contribution you can make is $6,000 ($7,000 if you are age 50 or older by the end of the year). For self-employed persons, the maximum annual addition to SEPs and Keoghs for 2020 is $57,000. If possible, it’s always best to max out your retirement plan contributions, or at least take full advantage of your employer match.

To qualify for the full annual IRA deduction, says TurboTax, you must either: 1) not be eligible to participate in a company retirement plan, or 2) if you are eligible, you must have adjusted gross income of $65,000 or less for singles, or $104,000 or less for married couples filing jointly. If you are not eligible for a company plan but your spouse is, your traditional IRA contribution is deductible if your combined gross income doesn’t exceed $196,000.

Please note: Arrowhead General Insurance Agency, Inc. does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.