Note: This information is not intended to be tax advice. Consult a tax preparation professional for tax advice.
It’s a new year. Time to get in shape, eat healthy, start a new side hustle, and… prepare your taxes. Really? Really.
While the deadline to file 2021 taxes isn’t until April 15, 2022, now is a great time to get organized and make some important decisions. This way, there will be no headaches, and you won’t be scrambling to get your taxes filed online at the last minute.
Take a look at these 6 steps to filing your taxes online, and start the new year with a sense of accomplishment!
In This Article
Step 1: Figure Out What Forms You Need
To file your taxes, you’ll need to fill out a bunch of important forms and documents. First being a Form W-2, a Form W-9, or both. These documents are where the confusion can start, so let’s look at the purpose of each one and which you’ll need to submit your tax return.
- Form W-2: If you are employed by a person or a company, you will get a Form W-2 sometime in January. This form states the amount of money you earned in 2021, as well as how much you paid in federal and state taxes. It also includes other payroll deductions, such as the amount you contributed to an employer-sponsored retirement plan. This is the main income form you’ll need when filing your tax return.
- Form W-9 and 1099: If you have a side hustle or started a business in 2021, you’ve likely completed a Form W-9 for your clients. If you earn more than $600 with a particular client (who should have your W-9 on file), they would then fill out a Form 1099-MISC indicating how much you were paid for the year. A copy of this form will be sent to both you and the Internal Revenue Service (IRS). You then report this income when you file your taxes online.
Step 2: Choose Between Standard and Itemized Deductions
Deductions are super important to think about since they can lower your taxable income, potentially giving you a bigger refund or a lower tax bill. As you file your taxes, you’ll have two options: You can take the standard deduction or itemize your deductions. Below are the forms you will have to complete with your online tax filing.
- Form 1040: If you have a 9-to-5 job and will be receiving a W-2, you may be able to take the standard deduction. For 2021, the standard deduction for individuals is $12,550 and $25,100 for married people filing jointly. If you use this standard deduction, you can’t itemize deductions as well. Instead, you’ll take the standard deduction and fill out a Form 1040 and submit it with your tax return.
- Form 1040 with schedules: If you’ve had a big life change (got married, got divorced, had a child, started a business, etc.), this may bump you into a different financial situation where you’ll need to take itemized deductions instead of the standard deduction. If this is the case, you may need to fill out one or more of the new schedules in addition to the Form 1040. For example, if you have capital gains, unemployment compensation, gambling winnings, or any deductions to claim (including student loan interest deduction, self-employment tax, or educator expenses), you may want to fill out Schedule 1.
If you plan on filing schedules for 2021, it’s important for you to prepare and organize your itemized deductions in advance, especially when filing your taxes online. Having these deductions in order can save you big bucks by lowering the amount you owe or perhaps even netting you a tax refund. Remember, if you plan on itemizing deductions, the IRS requires proof to back up your claims, so make sure you save all important receipts and paperwork. Here are some of the more common itemized deductions:
- Home mortgage interest
- Charitable contributions
- Medical expenses
- Self-employment expenses
- Home office and other associated deductions
- Educator expenses
- Child care expenses
Step 3: Gather All of Your Documents
The next step is to get all of the documents you’ll need to file your taxes organized and in one place for easy access. Sure, you can gather this paperwork as you work through the e-filing process, but you can make your life 10 times easier by having it all ready to go.
Here are a few of the documents you’ll definitely need:
- Paid student loan interest statements
- Mortgage interest statements
- Investment income statements
- Charitable contribution statements
Look out for your income and investment interest documents as they should be mailed or sent to you electronically by the end of January. If you want to get a head start, you can download many of these documents even earlier through your bank, mortgage provider, student loan provider, or payroll company.
Step 4: Choose a Software to File Your Taxes
How to File Your Taxes for Free
At this point, you’ve probably decided you’re going to file your taxes online yourself. Great choice! Now you have a couple of options. One being to file your taxes online for free using IRS Free File. With this tool, the IRS works with online tax preparation services to help you fill out your information and file your return online. It’s a free program, so it’s not as intuitive as a paid tax software program, but it won’t cost you any money.
IRS Free File has 2 options bases on your income:
- If your annual income is lower than $72,000: State tax filing, guided preparation, and calculations are included.
- If your annual income is above $72,000: State filing is not included, you file all forms yourself, and you only receive basic guidance on calculations.
Paid Tax Software
Alternatively, you can spend some money and use one of the more popular DIY tax software tools, like Intuit’s TurboTax or H&R Block.
These tax software programs make e-filing your taxes super easy since they use a Q&A format that walks you through the process. Paid plans come with more benefits; however, most of the popular options also offer a version that lets users who have simple tax returns file for free.
If you have a more complex or unique tax situation, consider upgrading to a paid version to make sure you’re submitting everything correctly. If you want professional help, you can go with an authorized e-file provider in your area. To find a local tax preparer, you can do a search here with your zip code or state.
Step 5: Fill Out Your Tax Forms
You’re almost there! Next, you’re going to fill out all your required tax forms, using your software of choice. This is where all of those documents you collected and organized will come in handy.
According to the IRS, the average American spends a total of 12 hours preparing and completing their tax return. You can potentially save some time by using a tax preparation software that is very intuitive and will guide you through the process. Some will even auto-populate the information for you when you upload your tax documents.
These softwares use interview-style questions and user-friendly guides that can turn a complex tax return into one that’s relatively simple to input. H&R Block’s tax software also includes features to make the process even easier, such as being able to upload your W-2 right from your mobile device, where it will scan for the correct information and pre-populate the forms. The IRS also provides additional resources, like a list of free forms that can help make sure you fill out everything correctly.
Step 6: File Early and Sign Up for Direct Deposit
If you think you may be getting a tax refund for 2021, there’s more of an incentive to prepare your taxes and e-file early. The sooner you file, the sooner you’ll get your refund, and you know what this means — more money in the bank. If you want your cash as fast as possible, make sure you choose direct deposit. It’s the safest and easiest way to get your funds.
The IRS states that choosing to receive your tax refund through direct deposit gets you your refund in 21 days or less, while a check can take up to 2 months to arrive at your door. The IRS pays out refunds based on a schedule that actually prioritizes e-filed returns and direct deposit refunds. To be a part of that group, sign up with the IRS for a direct deposit payment straight into your bank account. You can do this when you file your tax return electronically.
Filing your taxes online is instant, unlike mailing in a paper tax return, which takes time to reach the IRS. After you file your taxes online, you’ll get a notification from the IRS saying that it was successfully received or that an error occurred. Again, if you’re owed a tax refund, you will receive your money through direct deposit or a paper check. Remember, direct deposit is quicker and eliminates the risk of your money getting lost in the mail.
How do I know if I need to file taxes?
If your filing status is single and your 2021 income didn’t equal or exceed the standard deduction limit of $12,950 or $25,900 for married couples filing jointly (and you do not owe any special taxes or have any special tax situations), you don’t need to file taxes. However, if your income is over that limit, you do need to file a tax return for the year. There are some exceptions, so be sure to check with the IRS to see if any apply to you.
What happens if I don’t file my taxes at all?
It’s possible you may not have to file a tax return, but be sure to review your eligibility with the IRS to guarantee you are exempted before ruling yourself out. If you owe taxes, you can set up a payment plan with the IRS to pay them back over time. However, if you don’t pay them back at all, the IRS will try to collect the money in other ways, such as taking your wages. Failure to file also results in a penalty of 5% each month on any unpaid taxes, capped at 25%, which can add up to a large chunk of change that you will have to pay out.
Can I ask for an extension to file my taxes if I miss the deadline?
You can use the IRS Free File tool to request an extension online before the deadline passes. Extensions for filing will be automatically approved, but if you owe taxes, you still need to pay your taxes by the deadline. If you can’t pay your taxes on time, you will need to establish a payment plan with the IRS.
To request an extension to file your tax return after the deadline has passed, you can contact the IRS directly to discuss your options.
You now have all the power and tools you need to file your tax return online successfully! Follow these steps to make the process less stressful and to help protect your money, while saving you time along the way. (Pro tip: if you need more expert help, it’s advisable to seek out an accountant or tax professional).
Now that you’re a pro and ready to file your taxes, you can move on and set some other financial goals for the year.