Tips and changes you should know about when filling your 2021 tax returns

The deadline to file your 2021 tax returns or request an extension is coming up on April 18th. As you prepare, we wanted to offer a few tips to help you get through the season and understand what has changed since last year.

First, what’s new?

Before you get started, it’s good to know what is different about this season. The IRS has made a few adjustments to 2021 filing, which are published on its website and explained in this helpful article. 

Changes most likely to impact you include an Earned Income Tax Credit increase and adjustments to tax brackets.

Families will also want to stay up to date on the Child Tax Credit, which was increased to $3,600 for each child under 6 and sent out to some Americans through advance monthly payments during 2021. This was a temporary change as a result of the American Rescue Plan of 2021, Congress’s COVID relief package. If you received these payments in advance, note that the payment awarded once your return is submitted will be reduced.

Additionally, if you did not receive Economic Impact Payments (stimulus checks) during the past year, you may qualify to claim the  Recovery Rebate Credit. This is for individuals who were given only partial payments or no payments from the CARES Act.

Follow these tips for the best filing experience:

• Start as soon as possible: The deadline is coming in just under a month. You don’t want to be late and face penalties. Start gathering your documents and preparing now to avoid paying more.
• Gather the right documents: The first thing you need to do is collect all the right documents—your W-2s, receipts, 1099s, canceled checks, and income documentation from those outside your employer. A full list of suggested documents can be found here. 
• Understand how you will file: Are you single? Married filing jointly, or married filing separately? Choosing the best filing status will depend on your situation. In addition to filing status, you’ll want to know your deduction strategy and what credits you can claim. Some of the new ones are listed above, but a more complete list is provided here by the IRS.  
• Take advantage of the online filing tool: Individuals can file online through an IRS tool that guides taxpayers through the process. It’s designed to make filing quicker and easier. If you sign up for direct deposit through this tool, you’ll also receive refunds faster than by mail. 
• Get the help you need: Filing taxes can be daunting, especially when there are changes from year to year. It could be a good idea to speak with an expert about the strategy best for you. For more information, you can also visit the taxes page on usa.gov for answers to commonly asked questions or find more resources on the IRS website. 

The information contained within this article is for informational purposes and should not be considered financial or tax advice. Everyone’s financial and tax situations are unique and you should consult a financial advisor and tax professioanl for assistance with your particular situation and goals.