The vast majority of Americans have to file their taxes every year, even if they aren’t actively working. As the end of the year approaches, it’s time to start thinking about filing your 2021 taxes and what information you’ll need to submit a tax return.
When is the 2021 tax season?
The 2021 tax season begins in January 2022 and ends on April 15, 2022. This is when most people submit their taxes to avoid interest or penalties on any amount they owe.
If you need more time to prepare your tax return you can file for an extension for free using Form 4868. This gives you until Oct. 15 to file, but you still need to estimate and pay any tax you owe by April 15.
Do I have to file taxes?
Most adults are legally obligated to file state and federal taxes, but there are some exceptions. If your income is under the standard deduction amount for your filing status, you may not be required to file a federal income tax return.
For 2021, the standard deduction is $25,100 for married couples filing jointly, $12,550 for single taxpayers and married individuals filing separately, and $18,800 for heads of household.
Choose how you want to file taxes
If you are required to file income taxes, there are a few things to consider. First, you have to decide whether you want to file your taxes yourself using online software or hire a tax preparer, like a certified public accountant (CPA).
Online tax preparation
Tax prep services, like H&R Block and TurboTax, offer software and online tutorials to help you file your taxes yourself, or with the help of a professional for an extra fee. If your tax return is straightforward and you are confident in your calculations, this can be cheaper than hiring a CPA. You sign up for an account, choose the product that’s right for your income situation, and complete a series of questions to fill out your tax return.
Many of these services will check the information you entered to ensure there are no errors and help you prepare state tax returns if needed. The service will then file your return with the IRS and your state tax agency on your behalf.
Most tax software companies charge for their services. However, there are several options to file for free. The IRS Free File Program allows people with complex tax situations to file online for free through one of its partners if they meet a certain income limit. In 2020, the income threshold was $72,000.
If you earn more than the Free File program limit, you may still be able to file for free with online tax software if your situation is simple.
You can also use the IRS’s Free File Fillable Forms to complete your federal forms and file yourself at any income level. Keep in mind that this option does not include state tax forms.
In-person tax preparation
The second option is to work with a local tax preparation service. The IRS maintains a database of every credentialed tax return preparer, which makes it easy to find a reputable CPA near you.
These services will typically cost more than do-it-yourself online filing services, but can be a less stressful option if your tax situation is complicated.
If you are concerned about the cost of hiring a CPA, consider the IRS’s Volunteer Income Tax Assistance (VITA) program. To qualify, filers must earn $57,000 or less.
Taxpayers who are 60 or older can use the IRS’s Tax Counseling for the Elderly (TCE) program, which specializes in answering questions about pensions and retirement-related issues specific to seniors. All volunteer tax preparers are required to pass tax law training given by the IRS.
You can find VITA sites and TCE locations in your area using the IRS Free Tax Prep Locator Tool.
Gather your tax-filing information
Once you decide how you want to file your taxes, the next step is to gather your tax documents.
You can expect to receive most of your tax forms from employers and financial institutions in January and early February. These are forms such as your W-2, Form 1098 (if you own a home and pay mortgage interest) and any version of Form 1099 to report income other than wages, like self-employment earnings, unemployment compensation and investment income.
You may receive your tax forms digitally or in the mail. Keeping your documents in an easily accessible place can make completing your tax return a smoother process.
If you plan to claim tax deductions other than the standard deduction, you may need additional documentation. Gather documents like Form 1098 if you paid mortgage interest, receipts from charities you donated to and documents for out-of-pocket health insurance premiums if you’re self-employed.
Pay your tax bill or wait for your refund
The last step of the tax-filing process is to either pay your tax bill or wait to receive your refund from the IRS.
If you are owed a tax refund: You can either have the funds deposited directly into your bank account or have a paper check mailed to you. Receiving your tax refund via direct deposit is faster and safer than receiving a paper check in the mail. It can be even faster if you, or your tax preparer, file your tax return electronically. The IRS issues 9 out of 10 refunds in 21 days or less to those who choose direct deposit and file electronically.
If you owe taxes: You have until the tax deadline, April 15, to pay or your balance will start accruing interest and you may be assessed late fees. If you file with tax-filing software, you are typically given the option to pay online after submitting your return.
If you can’t afford to pay your tax bill by the due date, you have options.
- Offer in compromise: With Form 656, you can offer to pay less than the full balance of your bill. The IRS will determine your eligibility after you fill out an application and provide documentation showing that you can’t pay the full balance in a reasonable time frame. The application fee is $205.
- Set up an installment plan with the IRS: With an installment plan, you agree to pay a specific amount each month. There is a fee to set up this plan that varies from $31 for automatic withdrawals to $149 for plans with no automatic payments. A payment plan allows you to make your monthly payments until you pay the balance in full.
- Request a short-term extension: With a short-term extension, the IRS gives you 120 days to pay your tax bill in full. If you don’t pay within the extension period, your balance will incur penalties and interest.
The IRS recommends that you file your tax return even if you can’t pay the amount owed. You can also call the IRS at (800) 829-1040 to discuss payment options. State and local tax agencies handle repayments differently, so you should call your state or city tax office to discuss repayment plans or go online for more options.