Financial Wellness: IRS Tips for Filing Your 2021 Tax Return

More than 10 million electronically-filed 2020 tax returns contained errors, requiring manual review by IRS. As of December 4, 2021, 9.3 million returns remained to be processed. IRS is understaffed and working hard to get through the backlog.

IRS says these strategies will help you file a complete and accurate 2021 tax return:

• Gather all 2021 records like W-2s, 1099s, 1095s, receipts, canceled checks, and documents that support proof of income, deduction, and credits for your tax return.
• Store important tax documents together in a labeled electronic or paper file for easy access later if you are audited.
• Wait until you have all 2021 tax information in hand before you file to avoid delaying your tax refund.
• Consider a tax-deductible IRA contribution for 2021 by April 18, 2022, if your income qualifies. Consult with your tax advisor, bank, or financial advisor for details.

An IRS resource helps you set up an Online Account. Use IRS Secure Access Digital Identity (SADI) to verify your information, have enough tax withheld, and set up or change your bank account for direct deposit.

What’s new for filing in 2022

Even if you don’t have to file, doing so could result in a refund. Qualifying for certain tax credits or having federal income tax withheld from a paycheck may generate a refund.

Submitting an electronic return is the best way to expedite your refund, with software like Turbo Tax, your tax preparer’s filing system, or Free File on IRS.gov. If there are no errors or missing information in your return, the IRS expects to deposit most refunds within 21 days of when you file electronically and choose Direct deposit.

If you received advance Child Tax Credit payments, you need to file a 2021 tax return to compare the advance payments you received with the Child Tax Credit you qualify to claim on your 2021 tax return, even if you used the Non-Filer tool in 2021. In January 2022, IRS sent you Letter 6419 with your total 2021 advance Child Tax Credit payments. You will need the total for your 2021 return, or you can view the amount on your IRS Online Account. For details, see Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return.

You May Qualify for a Recovery Rebate Credit (stimulus payment). If you didn’t qualify for the third Economic Impact Payment or did not receive the full amount, you may be eligible for the Recovery Rebate Credit based on your 2021 tax situation. For more details, see Recovery Rebate Credit.

If your 2020 tax return hasn’t been processed, you can still file a 2021 return. To file electronically, you’ll need your 2020 Adjusted Gross Income (AGI). IRS states if you are waiting for your 2020 return to be processed, enter $0 (zero dollars) for last year’s AGI on the 2021 tax return.

Unemployment compensation received in 2021 is taxable. For more, see Tax Topic 418, Unemployment Compensation and Publication 525, Taxable and Nontaxable Income on IRS.gov.

IRS.gov tools and resources: Get answers to tax questions, pay taxes, or check the status of your refund. Filing assistance is available for free, depending on your income and/or age, from IRS’s Free File. Beyond IRS, VITA, and AARP Foundation Tax-Aide provide free help.

For more tips, see Tax Season 2022: It’s going to be another hectic year and Income tax guide for tax season 2022 | ZDNet