Paying taxes is our responsibility as individuals. In return, we get several benefits. Businesses need high-quality infrastructure and a healthy workforce to maintain their economic activity and business revenue. Education and healthcare social programs for citizens are also dependent on government tax collection. In countries where the tax collection system is fair and citizens pay their taxes responsibly, the economy is usually stronger. Therefore, filing taxes is a direct contribution to your country’s development. For some people, it may be difficult to keep up with taxes every year. In this article we’ll describe how to budget and file taxes for 2021 to help you comply with everything.
It’s important that you visit the IRS website IRS.gov; explore the different online tools available to help you get the information you need, calculate and file correctly. These tools are easy and accessible 24/7. They will assist you in finding information about your filing forms and submission process.
Confirm Taxpayer Identification Number
You need to make sure that your Individual Taxpayer Identification Number (ITIN) is valid at the moment of filing. This is a simple mistake, but an often overlooked aspect that may cause delays in your tax returns.
Once you have checked the IRS tools and check the validity of your ITIN, the next step of filing taxes in 2021 is to start organizing your tax records, supporting documents, calculations and everything else that’s needed on your tax forms. This will prevent you from having complications and it’s a good habit to streamline your filing.
Notify the IRS About Any Major Changes
If you change your main address, legal name, filing status, job, or any important financial capacity, you need to notify the IRS to avoid any delay or complication. You can do this either in their offices, by telephone, by using Form 8822 or 8822-B, or by a written statement.
In order to change your filing status you need to check your eligibility, mark the correct box for your filing status on your tax return, if your status has changed since the last time you filed, and finally fill-in and attach Form 1040X.
Check Your Tax Withholding
To help you figure out the portion that your employer has to withhold from your paycheck, you can use the IRS tool “Tax Withholding Estimator.” In case you have investment income, social security benefits, retirement, self employment or non-wage, you should be able to make estimated tax payments.
Check if You’re Eligible for Recovery Rebate Credit
When you are filing your income tax return, check your eligibility for claiming recovery rebate credit; a tax credit that will either increase the amount of your tax refund or decrease the amount of the tax you owe against your 2020 income tax.
Additionally, you may want to check if you’re eligible for economic impact payments. If your income for 2020 is within the guidelines for the Economic Impact Payment, you will be able to receive $1,200 for each adult individual ($2,400 for joint filers), and $500 per qualifying child under age 17.
Make Use of Interactive Tax Assistant (ITA)
Tax law is not an easy subject, and when you file your taxes in 2021, it may be a little more complicated. Expert guidance and good research from you are always advisable. The good news is that today you not only have access to all the information published by the IRS, you can also use Software tools to make this process easier, as we’ve mentioned before.
One of such options is ITA, a tool that provides answers to several tax law questions specific to your individual circumstances. You can find the answer to questions such as which income is taxable? Are you eligible for claiming a certain benefit? And other information related to deductible expenses on your tax return.
Refund Interest Payments
Make sure that you report refund interest payments on your federal income tax return because these are taxable. The IRS will send a special form called form 1099 INT to those who have received interest amounting to $10 or more.
Log Charitable and Medical Deductions
Deductions and credits seem very attractive when it comes to benefits. Therefore you must learn about your options and how to apply if you’re eligible. Any charitable cash contributions to certain organizations of up to $300 made in 2020 are eligible for charitable deductions.
On the other hand, if you have been sick and spent quite some time in hospital in 2020 and your medical bill is considerable, you can get some tax relief. Similarly, learn about Coronavirus reliefs such as Stimulus Checks, Paycheck Protection Program (PPP), loans, unemployment benefits and educational benefits.
E-File Your Taxes
Finally, as you probably already know, you can file your taxes electronically on the IRS website or using IRS2Go app. This makes your job easier by introducing The IRS Free File program that offers tax preparation software packages that can be used at no cost. The best part is that the software can find exemptions, deductions and credits. You can also look for Volunteer Income Tax assistance near you, and tax counseling for elderly or anyone who may need it.
If you are not comfortable filing a tax return yourself, you can choose a professional tax preparer from the directory of Federal Tax Return Preparers in your own area.
Tax laws are important for everyone, in order to contribute to our societies. If you are knowledgeable about tax laws and all its procedures, you can do it easily while taking benefits of the tools introduced by the IRS.
Certain deductions and refunds can also be claimed due to the global pandemic and the change of life events. Professional tax helpers can also be found easily if it’s a bit challenging for yourself.To successfully file your taxes in 2021, and every year, you just need to take care of submitting them on time and accurately.