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Tax Planning

January 27, 2022

Getting ready for tax season: Points to consider

Executive Summary

The approaching April 18 tax filing deadline is an opportune time to consider some things that could affect your 2021 federal or state income tax returns. Many of these developments were the result of the COVID-19 pandemic and the work-from-home mandates initiated in 2020 along with some modifications to tax laws — and all of them require attention.

Where do you work?

The pandemic forced many companies to switch to a remote work environment starting in 2020. If the location of your employment changed in 2020 and you were still working from home in 2021, it may matter whether your employer required you to work offsite, or if working from home was your choice.

The issue of where your employment income is taxed can depend on your municipality or state. For example, City of Philadelphia workers seeking city wage tax refunds for days worked outside of Philadelphia should obtain a statement from their employer attesting to the employer’s work-from-home mandate. Fortunately, many employers stopped withholding for Philadelphia nonresidents when they sent their employees home, and other businesses are now handling the refund process for all employees. Employees of those firms should check with their employers to ensure no further action is needed. Other states and municipalities have made clear statements that they will not tax the wage income of citizens working from home.

The message is clear: If you are still displaced for reasons owing to the pandemic, verify the tax treatment of your income with the municipality in which you live and work. It is possible policies have changed as the circumstances surrounding the pandemic continue to evolve. Further, the variations are endless and complicated. We recommend seeking professional tax advice if your state of residence is different from the state of your normal workplace.

Stimulus checks are not income

In 2020, millions of individuals received economic impact payments — or stimulus checks — as a provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Technically, those checks were an advance payment of a credit against 2020 taxes. Some individuals may have received a stimulus check in January 2021 and another in March 2021. When you prepare your 2021 tax return, you should reconcile any stimulus checks against the “recovery rebate credit.”

If your aggregate stimulus checks total an amount less than the calculated credit, you are entitled to receive additional credit against your 2021 taxes. If the amount you received is greater than the calculated credit, in most situations you are not required to return the overpayment.

Distributions from qualified retirement plans

Required minimum distributions (RMDs) from qualified retirement plans (e.g., IRAs and 403(b)s) did not get extended into 2021, so RMDs were required to be taken from traditional retirement accounts in 2021. These distributions were suspended for 2020.

Be aware that tax reporting, in the form dictated by the IRS, can be confusing. Pay careful attention to how you include the distributions on your tax return and seek professional help if necessary.

Fully fund your IRA

The 2021 contribution limit for traditional and Roth IRAs is $6,000, plus an additional $1,000 catch-up contribution for persons 50 and older. You may make contributions for 2021 until April 18, 2022.

Charitable deductions

You can take a deduction of up to $300 for charitable donations even if you do not itemize your deductions on your 2021 Schedule A. The deduction amount is the same whether you are filing as an individual or jointly. Additionally, special liberalized deductions may apply to itemized charitable gifts of cash. Note that there are exceptions and limitations for cash contributions to supporting organizations and donor-advised funds.

Gift tax returns

Many individuals made substantial taxable gifts in 2021 in anticipation of the passing of proposed legislation that would reduce the federal estate tax exemption amount and limit opportunities for wealth transfer. While not all gifts require you to file a gift tax return, doing so will begin the statute of limitations and limit the time period within which the IRS can come back and challenge the value or other aspects of your gift.

File on time

Last year the IRS extended filing deadlines, but not this year. As of this writing, you must file your 2021 taxes on or before April 18 or ask for an extension, but you must still estimate and pay any taxes owed by April 18, 2022.

Review your withholding

Although the Build Back Better Act appears to have stalled in Congress, tax brackets and rates could change this year if legislation is revived. Monitor your withholding from your wages and from distributions from places like your IRA or pension. Adjust your withholding as necessary.


All of these factors could affect your 2021 income tax filings, and we will be watching tax developments closely as the legislative landscape changes.

If you have questions, don’t hesitate to contact your Relationship Management Team.

This presentation is intended to provide a review of issues or topics of possible interest to Glenmede Trust Company clients and friends and is not intended as investment, tax or legal advice. It contains Glenmede’s opinions, which may change after the date of publication. Information gathered from third-party sources is assumed reliable but is not guaranteed. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Clients are encouraged to discuss anything they see here of interest with their tax advisor, attorney or Glenmede Relationship Manager.