Now is the time to prepare to file your 2021 tax return, and the IRS is reminding taxpayers that certain end-of-year financial transactions might have significant tax impacts.
Tax withholding from paychecks does not ordinarily take into account income sources like yearly or holiday bonuses, stock dividends, or selling real estate or other property at a profit. If you receive such income, you might end up getting a smaller tax refund than you have been anticipating, or even owing tax and penalties for underpayment.
In addition, the IRS reminds taxpayers that if they have outstanding debts like unpaid taxes from previous years, past-due child or spousal support, or overdue student loan payments, their 2021 tax refunds might be reduced by these amounts under the Treasury Offset Program (TOP).
A tax professional can help you determine the tax implications of income you received late in 2021.