Get ready to file taxes in 2021
- November 25th, 2020
There are steps you can take now to make sure your tax filing experience goes smoothly in 2021. First, they can visit the Get Ready page on IRS.gov.
Here are a few other things you can do now:
Check your withholding and make any adjustments soon
Since most taxpayers typically only have a few pay dates left this year, checking your withholding soon is especially important. It’s even more important if you:
• Received a smaller refund than expected after filing your 2019 taxes this year.
• Owed an unexpected tax bill last year.
• Experienced personal or financial changes that might change your tax liability.
You may owe an unexpected tax bill when you file your 2020 tax return next year, if you didn’t have enough withheld throughout the year. To avoid this kind of surprise, you should use the Tax Withholding Estimator to perform a quick paycheck or pension income checkup. Doing so helps you decide if you need to adjust your withholding or make estimated or additional tax payments now.
Gather tax documents and keep them for at least three years
Everyone should come up with a recordkeeping system. Whether it’s electronic or paper, you should use a system to keep all important information in one place. Having all needed documents on hand before you prepare your return helps you file a complete and accurate tax return. This includes:
• Your 2019 tax return.
• Form W-2 from employers.
• Form 1099 from banks and other payers.
• Forms 1095-A from the marketplace for those claiming the premium tax credit.
• Form 1099-NEC, Nonemployee Compensation
• Notice 1444, Your Economic Impact Payment.
Most income is taxable, including unemployment compensation, refund interest and income from the gig economy and virtual currencies. Therefore, you should also gather any documents from these types of earnings. You should keep copies of tax returns and all supporting documents for at least three years.
Confirm mailing and email addresses
To make sure forms make it to you on time, you should confirm now that each employer, bank and other payer has your current mailing address or email address. Typically, forms start arriving by mail or are available online in January.
Remember these new things when preparing for the 2021 tax filing season
• Taxpayers may be able to claim the recovery rebate credit if you met the eligibility requirements in 2020 and one of the following applies to you:
– You didn’t receive an Economic Impact Payment in 2020.
– You are single and your payment was less than $1,200.
– You are married, filed jointly for 2018 or 2019 and your payment was less than $2,400.
– You didn’t receive $500 for each qualifying child.
• Taxpayers who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income to anyone who received interest totaling at least $10.