Tax Tips for 2021

It’s that time of year where those who qualify to file their taxes do so. Whether it is your first time filing or you’ve been doing it for years, the process can be confusing. You may have a bunch of questions on the process and what it looks like. Do I need to file? Should I use a paid platform? What about the COVID-19 stimulus payments? All of these questions are valid but the process of filing your taxes for the previous year doesn’t have to be confusing and there are many resources out there to help you manage the annual process.

Should I file taxes this year? That depends on your income and household size. Filing by yourself or filing jointly will determine what amount you needed to make in 2020 as a household to file your taxes this year.

What is the difference between State and Federal Taxes? Federal income tax law is imposed by the federal government while state and local income tax is determined by the government of the state which you live in. Everyone pays federal taxes but state taxes will vary based on where you live in the state.

When should I file my taxes? Individual and corporate tax returns must be filed for the 2020 tax year by April 15, 2021. If you’re unable to file your return on time, you can request an extension to October 15, 2021. The IRS will begin accepting electronic returns anywhere between Jan. 15 and Feb. 1, 2021.

Should I use a service like E-File, H&R Block or Turbo Tax? Filing with a service can help simplify the process but often comes at a price. If your taxes are more complicated (i.e. if you do freelance or contract work) then it wouldn’t hurt to have help from a service. Ultimately you can file your taxes for free on the IRS Free File site or go to a local VITA location.

What should I do if I need to file previous years? If you need to file your taxes for previous years, you can do so by filling out a form and sending it to the IRS. You may have to pay a fine or penalty but the sooner it is resolved, the better. The IRS has many options for filing old returns. They will often help create a payment plan if necessary.

Does the COVID-19 pandemic impact my taxes? If you have received a stimulus check, you do not need to repay it.  There is no provision in the law that would require individuals who qualify for a payment based on their 2018 or 2019 tax returns, to pay back all or part of those payments. That money is yours to use as you need to.

What Information do I need to file my taxes? You will need different forms like a W-2, a W-4, or a 1099 to file your taxes. Your employer should provide all the forms. If your employer offers you health insurance, there will also be a form sent or given to you to verify that information when you file. Make sure to keep track of the tax forms you have so that when you file, you are prepared!

Filing your taxes can feel confusing but there are resources available to help. Locally, UWCI offers free tax assistance for anyone who needs it through their Volunteer Income Tax Assistance (VITA) sites.  There are also many websites and articles that provide tons of helpful information for filing your taxes.

Resources:

IRS: https://www.irs.gov/filing
H&R Block: https://www.hrblock.com/tax-center/income/other-income/how-much-do-you-have-to-make-to-file-taxes/

UWCI VITA: https://uwci.org/vita-2021/#:~:text=Since%20our%20program%20began%20in,continue%20through%20April%2015%2C%202021

E-File: https://www.e-file.com/info/taxpayer-covid-19-faq/

NerdWallet: https://www.nerdwallet.com/article/taxes/tax-changes