Skip to Main Content

Mid-Year Tax Planning Ideas for Tax Professionals

Mid-Year Tax Planning Ideas for Tax Professionals

It’s time for a mid-year checkup.

In today’s blog, Tom shares some planning ideas for tax professionals such as estimating 2021 income and adjusting withholding or estimated tax payments accordingly. He also considers ways to maximize stimulus payments and experiencing a better 2022 filing season. Then, he wants to know — how do you plan to handle client meetings in 2022? Will you be all virtual? Go back to the way things were before the pandemic? Or somewhere in between?

by Tom O’Saben, EA


Hello again, everybody from the University of Illinois Tax School. This is Tom O’Saben enrolled agent, I’m the Assistant Director for Professional Education and Outreach for Tax School. I’m also part of the fall Tax School instructor team, an author and reviewer of the University of Illinois Federal Tax Workbook. I’m heavily involved in the webinars we do throughout the year and these weekly blogs. In addition to all of that, I’m also a tax practitioner with now 31 years of experience. So let’s see what we’re going to talk about today.

As difficult as you may find this to believe, you just flipped the calendar the other day, didn’t you? And we’ve gone from the May 17th deadline and now we’re darn near halfway through the year. So believe it or not, it’s time for mid year checkup-it’s a time to see we’re halfway through, see where we are, see where our clients are going to be going forward, and any adjustments that need to be made.

So let’s start with some mid year checkup items, as I consider them to be. And let’s start with 2021 income projections and what those individuals, for example, who are employees. Maybe you might have some clients who weren’t pleased with the outcome of their return in 2020, maybe they got back too much, maybe they got packed too little, now would be a time to take a look at their pay stubs, for example. Have them provide you their pay stubs, make some projections on what their income is going to look like for this year. If we’re in a situation where they end up owing money or they don’t want to own money, then perhaps they should claim less exemptions, which will take more money out of their paycheck. Conversely, if they feel like they’re getting too much money back, then they could claim more exemptions, which would reduce the amount of tax being withheld from their paychecks, and also would impact their refund at tax time, but it would put more money in their paycheck now. So this might be a time for them to adjust their W4s accordingly, either to have more tax withheld by claiming less exemptions or less tax withheld by claiming more. I also want to mention since we’ve had kind of a goofy circumstance and when payments were due that come Tuesday, June 15th, the second quarter estimated tax payments are ready to be made. So we’re talking about people that need to make estimated tax payments because they don’t have withholding. Perhaps they’re self employed, perhaps they have a large investment portfolio. Those people who need to get that money paid in throughout the year. And I mentioned that this is for income projections ending May the 31st and let me explain in more detail what I’m referring to.

Now, this is not anything new, but you might be asking the question, “What are you talking about income ending May 31st?” You’ll find that the quarterly estimated tax payments are not equal quarters throughout the year. For example, April 15th, represents the first estimate of the year. January 15th estimate is not the first one of the year, it’s the last one of the previous year. So what’s in that April 15th estimate? Income or projections were making for income and expenses for January through March. Now the June 15th estimates that’s coming up right around the corner here. That’s the second estimate for the year, but it only covers a two month period of time, April and May. For example, I received an email over the weekend, taxpayer just won a half a million dollars in a drawing and it was in June. And first of all, I thought it was a scam, but after I realized that it did come from a legitimate taxpayer, he was asking, “When should I be sending the tax money in for these winnings?” I said, “Well, you want it in June, so if you look here on our screen, when does the income go with the estimate?” Well income in June would be with September 15th, during that third estimate for the year covering the period, June, July, and August. Then finally that fourth quarter one is due January 15th as I alluded to earlier, and it covers a longer period of time, it’s for the income of September, October, November, and December. Also for a lot of clients that’s when we true things up and make sure that things balance out for the year. So again, that January 15th estimate is the fourth one of the previous year, not the first one of the current year.

Something else I want to mention, I use these dates as generalities. If the 15th would fall on a weekend or a holiday, it will go to the next business day as the due date. It never goes backwards. For example, I did look up that January, 15th, 2022 is on Saturday so that means that the due date would go to Monday, January the 17th. Well, Monday January 17th is a federal tax holiday, it’s a federal holiday in general, it is Dr. Martin Luther King’s birthday. So that January estimate for the fourth quarter of 2021 will actually be due on Tuesday, January the 18th. So I want you to keep that in mind as again, as they’re not equal quarters throughout the year, nothing new, but repetition or being reminded is never a bad thing.

I also want to remind you about the Advanced Child Tax Credit. We mentioned this in a blog a couple of weeks ago, that for 2021 purposes, in the American Rescue Plan, there’s been a change to the Child Tax Credit for 2021. It’s been increased, it’s been made refundable. And in fact, the American Rescue Plan calls for the IRS to put a portal into place for clients to update information, to perhaps opt out, etc. and their most recent advice that I’m getting, or recent comments I’m getting from IRS, is that they expect that they’re going to have two portals that are gonna be up and running at the latest by July 1st. That’s what they say today. One portal will be for our clients to go and to update their information, perhaps they had a child that was born in 2021 and they want to start receiving the money for that child. Or perhaps they’ve decided they want to opt out, they don’t want the Advance Child Tax Credit. I don’t have an opinion about that. Either way, I just want you to be able to inform your clients and remind them that these Advanced Child Tax Credits when reconciled on a 2021 return, if the taxpayer got too much, they’re gonna have to pay it back. So that’s just a warning I want you to have. The second portal that the IRS is discussing coming out within the next couple of weeks here, will be for those taxpayers who don’t have a filing requirement, yet they would be entitled to Child Tax Credit. Remember, it’s refundable for 2021, thanks to the American Rescue Plan. That being said, the second portal will be there for them, the taxpayer, to report their information so that IRS has it and can begin to send the money out.

So let’s talk about some mid year planning ideas. Now you might recall yourself or your clients, just got through receiving those $1400 stimulus checks that started back in March. And we’re actually seeing some of that true up happening now where the initial payments were being sent out if IRS didn’t have 2020 information, they went off of 2019. Now that the 2020 returns are coming through and being processed, the IRS is making adjustments and in what I call a true up to send more money out to clients, if in fact, their 2020 situation was either less income, or perhaps they were a dependent in 2019 and now they’re not a dependent in 2020. But one thing I want you to be reminded is that this credit is an advance on 2021 returns. So ultimately, we’re going to have to reconcile the $1400 stimulus checks when clients file their returns next spring. So far, it looks like the stimulus payments will be treated the same way as previous stimulus payments, in that none of that money will have to go back to the government if in fact income would be higher or circumstances different. Stay tuned on that point, but this is where the planning comes in. What can we do now to maximize stimulus? Is it possible for example, you take someone who is an employee, could they put more money into 401(k)? If they’re eligible, could they contribute to an IRA or an HSA? Things which would bring down their taxable income and perhaps maximize the stimulus payments that they would be entitled to receive. If there are in fact self employed, purchasing equipment and making that decision to perhaps write off that equipment during 2021 to again, lower that adjusted gross income and therefore maximize the stimulus payments. Maybe they won’t get more of that money now, but when the 2021 return is filed, then there will be a circumstance where they could receive more.

I think it’s also worth mentioning that dealing with the Advanced Premium Tax Credits for those of our clients who purchase their health insurance on the marketplace, in 2020 only that was an anomaly, where if our clients had projected their income too low. Yes, we did a calculation which said, “Hey, you owe some or all of this Premium Assistance back,” but the American Rescue Plan waived that off in 2020. Well, everything that I know as of today says that’s not the case in 2021. So we may need to meet or have a discussion with those clients who in fact are receiving Advanced Premium Assistance by buying their health insurance on the marketplace. If they projected their income too low and they would owe some of that Premium Assistance back, it looks like they will owe it back. So that reconciliation will result in them owing money. Is that something we need to plan for? Should they contact the marketplace now if for some reason their income changed dramatically and get that adjustment made, so that they don’t owe a bunch of money back come next spring?

How about getting after those extensions? Lots and lots of extensions were filed for all of the tax law changes we were dealing with. Sometimes we just went ahead and wrung our hands and said, “You know what, we need the dust to clear. Let’s go ahead and file extensions and we’ll deal with this later.” You know, October 15th comes around pretty quick, doesn’t it? And as I say here, procrastinators always procrastinate. So the more things that we can do this summer to kind of get after those clients a little bit to get those returns filed, the easier October 15th will be for everyone. I think that’s an important consideration. Also too, if you’re dealing with any amended tax returns, summertime is a good time to get those amended returns filed. You’ve got a clear brain, you can spend more time on the various issues, maybe we have corrections to make, maybe there’s some planning to do, perhaps opting out of say, Section 179 for a self employed person. Or we found some mistakes in previous years, maybe there’s some issues to deal with net operating losses and all the changes we’ve had. Summertime is a good time to get those amended returns out of the way instead of putting those on the back burner. Then the client comes in next filing season and says “Hey, what about those changes we were going to make?” And then we’re scrambling at the busiest time of the year. So hey, take my word for it. I am the procrastinator’s procrastinator, so I’m saying “teacher teach thyself” and trying to make things a little bit easier for you, as you go through mid year planning.

I do have a parting question, an assignment I’d like to give you. I’d like to know what you’re considering for your plans in 2022. And specifically what I say here on the screen, “will your plans for 2022 appointments be the same as 2021?” For example, in my office we did kind of a hybrid. We did some zoom appointments, we did some face to face, we had some people that would upload their information to the portal. Are you going to continue with that kind of approach? Are you going to become a completely virtual office? Not making an opinion about that, I’d like to know and I think our attendees would like to know as well, our viewers. Or are you planning to go back to your pre-pandemic ways? I know a lot of clients, I’m sure my experience was no different from yours. That a lot of people said, “Well, I miss seeing your smiling face.” And I said, “I miss seeing yours as well.” So we’d like to know, I’d like you to share it in the comments. We’ll post these on our Facebook page and we and the rest of our participants are anxious to know and then we’ll share those results. And maybe it’ll be some assistance as you’re trying to decide, you may be on the fence as to how you’re going to approach 2022. And maybe some advice from some of your colleagues will help you in dealing with all this.

Well, once again, ladies and gentlemen, as I said at the outset, we’re already halfway through 2021. It’s hard to believe, isn’t it? You know, my grandma used to say that the older you get, the faster time goes and boy she was right. So if we can have some tidbits here that you can share with your clients, do some mid year planning, it’s going to make for a better informed taxpayer, a better client for you, and perhaps maybe even a more “normal,” we can only hope for that, tax season come next filing season. So for now, for all of us here at the University of Illinois Tax School, this is Tom O’Saben, saying we’ll say goodbye, for just a while.

Disclaimer: The information referenced in Tax School’s blog is accurate at the date of publication. You may contact if you have more up-to-date, supported information and we will create an addendum.

University of Illinois Tax School is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. This blog and the information contained herein does not constitute tax client advice.