Several modifications were enacted in the 2020 tax year due to coronavirus-related legislation, as well as several that were already in the works.
The 2021 tax season has begun as we begin the third year of the Covid-19 pandemic. And, just as in 2020, there is a slew of new tax changes to keep track of, ranging from stimulus payments to enhanced child tax credits to permissible deductions and credits. Here’s a rundown of things to think about as you prepare to file your tax return for 2021.
This year, charitable giving deductions have been increased, and the Child Tax Credit has been expanded.
The following are the most important details to be aware of for the 2022 tax season:
- The tax deadline is April 18, 2022, for all federal tax returns and payments.
- In 2021, the standard deduction for single filers will be $12,550, and for married couples filing jointly, it will be $25,100.
- In 2021, the income tax bands were raised to account for inflation.
- Even if you take the standard deduction, you can deduct up to $300 ($600 if married filing jointly) in charitable contributions “above the line.”
- The basic exemption level for those who die in 2021 is $11.7 million, up from $11.58 million the prior year.
Things to Remember When Filing Your Taxes
1. To avoid delays, file an accurate return and use e-file and direct deposit:
When taxpayers have all they need to complete an accurate return, they should file electronically and choose direct deposit. Taxpayers have a variety of options, including hiring a reputable tax consultant. When people use e-file, the software helps them avoid mistakes by doing the math. It uses a question-and-answer structure to walk people through each area of their tax return.
2. Before contacting the IRS, use online resources to avoid long wait times on the phone:
Demand for IRS helplines is still at an all-time high. To avoid long waits, the IRS recommends that customers utilize IRS.gov to seek answers to their tax questions, check the status of their refund, or pay their taxes. There’s no need to wait or make an appointment because online tools and resources are available 24 hours a day, seven days a week.
3. Before preparing a tax return, gather all papers and double-check that the stimulus payment and advance Child Tax Credit details are correct:
People should have their advance Child Tax Credit and Economic Impact Payment information on hand when filing, in addition to W-2s, Form 1099s, and other income-related statements.
If a return has errors or is incomplete, it may be subjected to additional scrutiny while the IRS corrects the problem, causing the tax refund to be delayed. When preparing a tax return electronically, using IRS data can help decrease errors and processing time.
4. Special advice for e-filing a tax return in 2021:
Taxpayers will require their most recent tax return’s Adjusted Gross Income, or AGI, to validate and correctly submit an electronically filed tax return to the IRS. If you’re waiting for your 2020 tax return to be completed, here’s specific advice to ensure the IRS accepts your return. On the 2021 tax return, make sure to write $0 (zero dollars) for last year’s AGI. For those who used a Non-Filer tool in 2021 to register for an advance Child Tax Credit or third Economic Impact Payment, their prior-year AGI should be $1. Everyone else should input their AGI from the previous year’s tax return. This field will auto-populate if you’re using the same tax preparation program as last year.
Things To Know:
- The IRS has announced that tax season will open Monday, January 24, 2022.
- The Free File began operations on January 14, 2022. Taxpayers with an Adjusted Gross Income (AGI) of $73,000 or less in 2021 can file their taxes electronically for free using software offered by commercial tax filing companies under the program, which is exactly what it sounds like.
- Your AGI can be found online 11 of your Form 1040. The amount is determined before claiming standard or itemized deductions and includes income-less adjustments. According to statistics, the majority of taxpayers are entitled to Free File.
- Even though the filing season hasn’t started yet, you may do your taxes today if you utilize Free File. To see the Free File alternatives, go to IRS.gov/freefile. When the IRS officially opens tax season and begins processing tax returns, the Free File provider you choose will submit your form.
Important note:
Due to Hurricane Ida, several residents and company owners in Louisiana, Mississippi, New York, and New Jersey gained extensions on their IRS filing and payment deadlines. Taxpayers in areas of Kentucky were given extensions as a result of the tornado in December 2021. Look at the IRS’s disaster relief announcements to see if you’re eligible.
Finally, if you’re looking for a trustworthy tax expert in your area, feel free to give us a call.
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