How To File Taxes: An Ultimate Guide To Filing Taxes In 2021

-

The big news this tax season is that the deadline for filing has been pushed back from April 15th to May 17th. This decision was made in light of the ongoing coronavirus pandemic, and it gives taxpayers a little more time to file their taxes. 

That said, it never hurts to start preparing a little early. And if you’re new to filing taxes, or you’re not sure you’ve done it correctly in the past, then you may want to go over the basics of filing. Fortunately, even though filing your taxes seems intimidating, it can be fairly straightforward once you answer a few questions.


Who has to file their taxes?


If you’re reading this, you probably need to file a tax return. If you’re a dependent or your income is very low, you may not need to file, however, there can still be benefits to filing in these cases. So it’s best to check with a tax professional if you’re unsure of whether or not you should file. 


What will I need to file my taxes?


The first step in filing your taxes is gathering the forms and documents you’ve been sent throughout the year. 


  • If you’re a full-time employee, your employer should have sent you a W-2 form, which documents how much you earned throughout the year and how much of it has been withheld already for your taxes. Your company is required to send you a W-2 by January 31st, so you should have it by now. 


  • If you’re a contractor, freelancer, or otherwise work part-time, you should have received some type of 1099 form from your clients. A 1099 documents money you earned outside of any W-2 income. There are several different 1099s, but they also should have been sent to you by early February at the latest. 


  • You’ll also need documentation or receipts for any other type of income you received throughout the year. This could include income from investments in the stock market or rental properties, for example. 


  • Finally, if you paid quarterly taxes, property taxes, or any other taxes throughout the year, gather the documentation for those payments. 


What’s my filing status?


When the government asks you to choose a filing status, they’re asking about your current marital status. The two most common filing statuses are “single” and “married, filing jointly.” However, you may also be “married, filing separately” or a “qualifying widow(er)”. Finally, if you’re not married, but have dependents, you may file as “head of household.”


Your filing status determines your eligibility for different tax credits, deductions, and rates, so it’s important to make sure you're filing your taxes under the correct status.


Should I take the standardized deduction or itemize?


One of the major decisions you’ll make while filing your taxes is whether to use the standard deduction or to itemize your deductions. 


First, it helps to understand what these terms mean. When you take a deduction, you deduct an amount from your taxable income, which in turn reduces your tax liability. This is different from a tax credit, which reduces your actual amount of tax owed.

The standard deduction for 2020 is $12,400 for those filing singly and $28,400 for a married couple filing jointly. This is the option that most taxpayers will choose to take. You should only itemize your deductions if the total amount of the deductions you can claim is greater than the standard deduction. This is unusual, but by no means impossible. Deductions exist for a wide range of expenses, especially for those who are self-employed. 


For more information on both deductions and credits, check out this helpful list from the IRS.


How can I file my tax return?


There are three ways to file your return. You can e-file, mail a paper return, or use the help of a tax professional. The IRS discourages mailing a paper return, as it’s less safe than filing online. 


While there are a plethora of online companies that will file your taxes for a fee, you can also file them for free through the IRS. However, free filing with the IRS is only available to those with an income of less than $72,000 annually. Keep in mind, if your state has an income tax, you will also need to do that on your own if you choose this option. 


Your last option is to get professional help with your taxes. This is a great option for many people, especially those with businesses or complex tax returns that would benefit from individualized attention.


If you need help navigating your taxes, contact AG Fintax today and let our professionals guide you through the process.

Comments

Post a Comment

Popular posts from this blog

What Does 2021 Hold For Small Businesses Digital Financial Services?

-
Image
If 2020 taught us anything, it’s that digital financial services are here to stay. Lockdowns, quarantines, and social distancing all caused by the global COVID-19 pandemic illustrated not just the need but the necessity for virtual banking services. Thanks to the tech and accounting experts, handling one’s business from the comfort of a home office became possible and helped millions of small businesses stay afloat. And the use of these digital tools is only going to improve and spread in 2021. Forced to digitally transform, banks and financial institutions, which were deemed essential, have evolved their services to serve a new age, one that’s more prepared for a disaster and can be accessed anywhere.   In this guide, we’ll look at what digital financial services have in store for small businesses in 2021.   Mobile Expansion Mobile banking has become the new normal within the last 18 months, pushed forward by the isolation of the coronavirus. This might not sound too surprisi...
Read more

First-Time Investor? Here’s What You Need to Know About Taxes

-
Image
With the advent of apps and web services geared toward casual, amateur investors—Robinhood, Acorns, and Zacks Trade, for example—the number of people trying their hand at trading stocks is increasing daily.  This can be a great way to make some money and enjoy yourself while doing it. But if you’re not prepared come tax time, you could find that you owe more money than you bargained for thanks to your trading habit.  If you’re just getting into investing, here’s what you need to know about taxes.  Keep records of your transactions While the app or brokerage you use will maintain reliable records, it’s a good idea to keep your own in case something happens. After all, companies do get cyber hacked, have outages, and sometimes lose data. If that were to happen around tax time, you could end up without the information you need to file properly.  The things you should track include:  What stocks you’ve purchased Number of shares What you’ve sold Dates of all transac...
Read more

PPP Alert: New Shot for Your Tax-Free Cash

-
Image
  PPP Alert: New Shot for Your Tax-Free Cash  Did you miss out on the first two opportunities to receive your tax-free Paycheck Protection Program (PPP) cash? Many did miss out. Why? One reason: the word “loan.” Who wants a loan? No one. Well, almost no one. But who wants a cash gift, tax-free? If you do, read on for the details. But first, you should know that the big picture works like this:       You obtain your PPP tax-free monies from a lender (it’s called a “loan,” but watch that word disappear as you read this article).       You spend all the PPP money on yourself if you are self-employed or operate as a partnership; on payroll (including pay to you, if that applies); and on other covered expenses such as rent, interest, utilities, operations, property damage, suppliers, and worker protection.       You apply for loan forgiveness and achieve 100 percent loan forgiveness, which is easy-peasy when you spend 60 perc...
Read more