Tax time isn’t technically until April – but when you get your W-2’s early in the year – it’s time to talk taxes.
Tax time isn’t technically until April – but when you get your W-2’s early in the year – it’s time to talk taxes. Whether it is your first time filing or you’ve been doing it for years, the process can be confusing for some. 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 advance child tax credit payments and the economic impact payments? Am I supposed to file my FAFSA at the same time? What is a FAFSA? 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 18, 2022. If you’re unable to file your return on time, you can request an extension to October 15, 2022. The IRS will begin accepting electronic returns anywhere between January 24 and January 31, 2022.
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.
What should I do if I received the Advanced Child Tax Credit Payments? If you have received any of the advance child tax credit payments, you’ll have to compare the payments you received with the amount of the child tax credit you would normally claim on your return. If you received less than what you are allowed, you can claim the credit when you file. If you didn’t get a monthly advance payment, you can still claim it to get a lump sum payment.
“In January 2022, the IRS will send Letter 6419 with the total amount of advance child tax credit payments taxpayers received in 2021. People should keep this and any other IRS letters about advance child tax credit payments with their tax records. Individuals can also create or log in to IRS.gov online account to securely access their child tax credit payment amounts.” (IRS.com)
What about the economic impact payments? If you didn’t receive all three of the economic impact payments or didn’t receive the full amount, you may still be eligible to receive “rebate” money. You’ll need to do some figuring out what you received and what was sent and go from there. And, like the advanced child tax payments, the IRS is going to send out letters that will tell you how much you received.
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!
Should I file my FAFSA at the same time? If you can, you should. It’s a great time to file your FAFSA (Free Application For Student Aid) because all of your information is in one place. Also, even if you are on the fence and aren’t sure, the FAFSA is free to file and nothing bad will happen if you don’t end up going to college that semester/year. Learn more about filing your FAFSA here.
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