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What Must a Taxpayer Have Before Filing a 2021 Tax Return?

What Must a Taxpayer Have Before Filing a 2021 Tax Return?
Ines Zemelman, EA
06 January 2022

Although the official deadline for filing your 2021 tax return isn't until April 15th, there are some things you must do before you file. In this article, we'll go over what you need to have in order to make the process as smooth and stress-free as possible. So whether you're a first-time filer or just need a refresher, read on for what you need to get started!

Don’t file prematurely

Taxpayers should not file late, but they should also not file early. People who submit before receiving all of the necessary tax reporting paperwork run the risk of making a blunder, which could cause processing delays.

Year-end paperwork usually begins arriving in the mail – or made available online – in January. They should be thoroughly examined by taxpayers. If any of the information displayed is incorrect or unavailable, taxpayers should immediately contact the payer for a correction or to confirm that they have their latest mailing or email address.

In January 2022, the IRS issued Letter 6419, Advance Child Tax Credit Reconciliation, to assist individuals in reconciling and receiving the entire amount of their Child Tax Credit for the year 2021. The entire amount of 2021 advance Child Tax Credit payments issued, as well as the number of qualifying children utilized to determine their advance payments, are included in this letter. People will need this data to correctly claim the other half of the 2021 Child Tax Credit on their 2021 tax return and avoid processing delays. The IRS strongly recommends that people double-check their information.

Most eligible people have already received their third Economic Impact Payment and will not mention it when filing their taxes. However, based on their 2021 tax position, those who did not qualify for a third payment or did not receive the entire amount may be qualified for the 2021 Recovery Rebate Credit. To avoid a processing delay, they'll need the total amount of their third Economic Impact Payment to lodge an accurate tax return. Taxpayers can examine the total amount of the third-round Economic Impact Payment by logging into their IRS Online Account or waiting for IRS Letter 6475.

Why did I receive IRS Letter 6475 or 6419?

"Your Third Economic Impact Payment," Letter 6475, explains how much stimulus money you got in 2021, counting plus-up payments. It will be mailed to everybody who obtained the third wave of stimulus cheques in late January.

If you are qualified to collect the Recovery Rebate Credit on your 2021 tax return when you file in 2022, you will get a letter informing you of your eligibility. If you received less than the full amount on your third stimulus check (or never received it at all), the credit will be applied to any taxes you owe in 2021 or will be included in your refund.

On the other hand, the information in Letter 6419, "2021 Advance Child Tax Credit," includes the total amount of advance tax credit payments your family received in 2021, as well as the number of qualified children on which the advance payments were based. If you got child tax credit advance payments, you must file a 2021 tax return and compare the payments to the amount you were entitled to.

Should individuals who aren’t required to file a tax return still file one?

Individuals who are not required to file a tax return this season are strongly encouraged to do so in order to collect potentially thousands of dollars in tax credits, according to the IRS. Individuals can obtain benefits by filing a tax return:

  • For any remaining 2021 stimulus payments that they may not have gotten (for example, if they added a new child or other dependent in 2021), they can use the Recovery Rebate Credit.
  • The remaining Child Tax Credit for which they are qualified, as well as any missed monthly payments (for example, if they added a new qualifying child in 2021)
  • The Earned Income Tax Credit (EITC) is the largest refundable tax credit offered by the federal government to low- and moderate-income families (the amount of which has been nearly tripled for filers without children).

 

Where can one access vital information about their federal tax account?

Individuals can safely access information about their federal tax account, including payments, tax records, and more, using their IRS Online Account. Individuals might look at their account to assist them in submitting a tax return:

  • For the tax year 2021, the total amount of Economic Impact Payments issued
  • The total amount of advance Child Tax Credit payments 
  • Their most recent tax return's adjusted gross income
  • Any estimated tax payments they paid, as well as any refunds applied as a credit

They may now make and track payments as well as change communication choices, such as going paperless and requesting email notifications for certain online notices. If they haven't already done so, taxpayers are advised to create an online account or log in to access this information and try out the new features.

Which tax documents should you secure before filing a tax return?

Tax documents that are organized make it easier to prepare a complete and correct tax return, and they may also assist people discover previously ignored deductions or credits. Taxpayers should hold off on filing until they have all of their supporting income statements, which may include but are not limited to:

  • Forms W-2 from employer(s)
  • Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends and distributions from a pension, annuity or retirement plan
  • Form 1099-K, 1099-Misc, W-2 or other income statement if they worked in the gig economy

  • Form 1099-INT if they received interest payments

  • Other income documents and records reporting virtual or crypto currency transactions

  • Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance Premium Tax Credits for Marketplace coverage

  • Letter 6419, 2021 Total advance Child Tax Credit Payments to reconcile advance Child Tax Credit payments

  • Letter 6475, 2021 Economic Impact Payment, to determine eligibility to claim the Recovery Rebate Credit

Where can a taxpayer get help in filing their tax return?

When taxpayers have gathered all of their tax paperwork and information, it's time to think about how they'll file. Contact the experts at Taxes for Expats. We're here to offer personalized service tailored specifically for expatriates living in the US. Whether you need a consultation about how federal taxes work or help filing an extension on time, we’re happy to answer any questions that might come up.

Ines Zemelman, EA
Founder of TFX