U.S. markets open in 3 hours 40 minutes
  • S&P Futures

    3,813.25
    -25.75 (-0.67%)
     
  • Dow Futures

    31,405.00
    -60.00 (-0.19%)
     
  • Nasdaq Futures

    12,449.50
    -214.25 (-1.69%)
     
  • Russell 2000 Futures

    2,173.60
    -16.10 (-0.74%)
     
  • Crude Oil

    66.09
    0.00 (0.00%)
     
  • Gold

    1,690.10
    -8.40 (-0.49%)
     
  • Silver

    25.35
    +0.06 (+0.25%)
     
  • EUR/USD

    1.1879
    -0.0045 (-0.38%)
     
  • 10-Yr Bond

    1.5540
    0.0000 (0.00%)
     
  • Vix

    27.25
    -1.32 (-4.62%)
     
  • GBP/USD

    1.3847
    +0.0019 (+0.14%)
     
  • USD/JPY

    108.5050
    +0.1230 (+0.11%)
     
  • BTC-USD

    50,240.16
    -760.56 (-1.49%)
     
  • CMC Crypto 200

    1,016.51
    +73.34 (+7.78%)
     
  • FTSE 100

    6,631.36
    +0.84 (+0.01%)
     
  • Nikkei 225

    28,743.25
    -121.07 (-0.42%)
     

Your Step-by-Step Guide To Approaching Taxes in 2021

Gabrielle Olya
·5 min read
kate_sept2004 / iStock.com
kate_sept2004 / iStock.com

Tax season may not be your favorite time of year, but it’s a part of life for most income-earning Americans. The process of doing your taxes might seem overwhelming, but if you break it down into easy-to-do steps, it really isn’t so bad. Plus, the end result could be extra money in your pocket if you’re owed a refund.

Helpful: All the New Numbers You Need To Know for Planning Ahead on Taxes

Whether you’re doing your own taxes or using an accountant, these are the steps every tax filer must take in 2021.

Last updated: Feb. 2, 2021

Happy senior woman enjoying summer beach vacations.
Happy senior woman enjoying summer beach vacations.

1. Figure Out If You Need To File Taxes This Year

Your filing status, age, income and dependency status determine whether or not you need to file taxes, and there are a few reasons you can skip the process altogether. If you are a low-income earner, are 65 or older and don’t meet the minimum income thresholds, or you qualify as a dependent, you may not have to file taxes. However, even if you don’t have to file taxes, you may still want to if you are eligible to receive the earned income tax credit, the Affordable Care Act premium tax credit or a refund of overpaid taxes from a previous year.

If you don’t meet these exemptions, or you do, but may get money from the IRS if you file, continue on to the next step.

Plan to keep savings in the piggy bank in 2021 year.
Plan to keep savings in the piggy bank in 2021 year.

2. Be Aware of the Key Dates

Make sure you are aware of all the important tax dates for 2021 so you don’t miss a deadline. You can begin filing your taxes now, and the IRS will begin processing returns on Feb. 12. April 15 is the deadline for most individuals to file their 2020 tax returns; Oct. 15 is the deadline to file for those requesting an extension on their 2020 tax returns.

Paperwork, documents, organized, paper clips, papers
Paperwork, documents, organized, paper clips, papers

3. Gather All of the Necessary Documents

Whether you are doing your own taxes or using a tax preparer, make sure that you have gathered all of the necessary information and documents so that your tax paperwork is accurate. You will need documentation of:

  • Personal information

  • Dependent information

  • Work income

  • Investment income

  • Distributions from special accounts (retirement income, Social Security income and HSA distributions)

  • Other income (unemployment benefits, gambling income, distributions from education savings plans, income from sales of property, prior year installment sale information, and business or farming income)

  • Child care costs

  • Job-related expenses (only if you are an armed-force reservist, qualified performing artist, fee-basis state or local government official, an employee with impairment-related work expenses or an eligible educator)

  • Tax preparation costs (only if you are self-employed)

  • Adoption costs

  • Educational costs

  • Healthcare-related records

  • Charitable contributions

  • IRA contributions

  • Real estate property costs

  • Deductible taxes

  • Federal disaster area provisions

  • Other information (estimated tax payments you made during the year, prior year’s refund applied to the current year and any amount you paid in connection with a filing extension; and foreign bank account information)

Computer, tax return
Computer, tax return

4. Decide How You Will Be Filing Taxes

If you will be using a tax preparer, make an appointment sooner rather than later, as they tend to get busy closer to the April 15 deadline.

If you are doing your own taxes, figure out how you will be filing (via mail or online), and if you will be using any tax software or apps to help you through the process. If you make $72,000 or less a year, you can file for free via the IRS Free File Program.

Close-up of tax return check and USA currency.
Close-up of tax return check and USA currency.

5. Determine If You Owe Money to the IRS -- Or If You Are Owed Money

When you complete your tax forms, you will see the difference between the amount of taxes you paid for the year and the amount of taxes you owed for the year. If you owe money to the IRS, you generally need to submit the payment along with the filing. If you cannot pay your taxes in full, you may be able to request a payment plan to make payments in installments.

If you are owed money from the IRS, you will receive it in the form of a refund. Direct deposit is the quickest and easiest way to receive your refund, so be sure to fill out your bank account information if you qualify for money back.

Tips: Most Popular Things To Do With Your Tax Refund — and How To Do It Smarter

Concentrated woman reviewing financial documents at home.
Concentrated woman reviewing financial documents at home.

6. Double-Check All of Your Forms Before Submitting

Whether you are submitting your taxes yourself or filing through an accountant, double-check all forms for accuracy before submitting them to the IRS. Make sure all numbers are correct — this includes income, expenses, Social Security numbers and ID numbers for you and your dependents. A simple mistake or a typo can lead to delays in the IRS processing your return.

Once you’ve determined that your return is accurate, submit it to the IRS (or have your tax professional submit it on your behalf).

Close up of business documents stack on desk , report papers stack.
Close up of business documents stack on desk , report papers stack.

7. Hold Onto All of Your Paperwork

Once you’ve submitted your tax return, you may be tempted to throw out all of the paperwork — but you need to hold onto your tax records for at least three years. Having all of your documents safely filed away will ensure that you can defend yourself if you do end up getting audited by the IRS.

More From GOBankingRates

This article originally appeared on GOBankingRates.com: Your Step-by-Step Guide To Approaching Taxes in 2021