Free Guide to Filing Your 2021 Tax Return

Understanding the Basics of Filing Your 2021 Tax Return

Filing a tax return means reporting your income and financial information to the Internal Revenue Service (IRS) for the year 2021. The tax year 2021 runs from January 1 through December 31, 2021. Most people must file a return if their income exceeds certain thresholds set by the IRS. For 2021, a single person under age 65 needed to file if they earned $12,550 or more in income. If you were married filing jointly and both spouses were under 65, the threshold was $25,100. These numbers are adjusted yearly based on inflation.

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Your tax return serves several purposes. It reports how much money you earned throughout the year, documents taxes that were already withheld from your paychecks, and calculates whether you owe additional taxes or should receive a refund. The IRS uses this information to maintain accurate records of your income and tax payments.

For the 2021 tax year, you had until April 18, 2022, to file your return. However, if you filed after that date and owe taxes, you may face penalties and interest charges. If you were due a refund, filing late simply means you waited longer to receive your money.

There are different filing statuses you might use, each with different income thresholds and tax calculations. Your filing status depends on your family situation and marital status on December 31, 2021. Understanding which status applies to you is important because it affects your tax liability.

Practical takeaway: Before starting your 2021 return, gather documents showing your total income for that year, including W-2 forms from employers, 1099 forms from other income sources, and records of any taxes already paid. Knowing your income amount helps determine if you must file.

Gathering Documents and Information You'll Need

Filing a tax return requires specific documents and records. The most common document is the W-2, which employers must provide by January 31 showing your wages and taxes withheld. If you worked multiple jobs in 2021, you should receive a W-2 from each employer. The W-2 shows your gross pay, federal income tax withheld, Social Security tax, and Medicare tax information. If you earned money from self-employment, freelance work, or side jobs, you might receive a 1099-NEC or 1099-MISC form instead. These forms report non-employee income.

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For investment income, you may receive 1099-INT forms for interest earned from savings accounts or certificates of deposit, and 1099-DIV forms for dividends from stocks or mutual funds. If you sold stocks, bonds, or real estate, you need documents showing your purchase price and sale price to calculate your gain or loss. If you received unemployment benefits in 2021, you should have received a 1099-G form.

Additionally, gather records related to deductions and credits you might claim. If you paid student loan interest, you need records of those payments. If you had significant medical expenses, mortgage interest, property taxes, or charitable donations, collect documentation for these items. Parents claiming the Child Tax Credit need to know their children's Social Security numbers and birthdates.

Keep all receipts, statements, and forms in one place. Many people use a folder, box, or digital file to organize documents. Having everything together before you start filing makes the process smoother and reduces the chance of missing important information.

If you had significant changes in your life during 2021—such as marriage, divorce, buying a home, or having a child—gather documents related to these events. These changes can affect your tax situation and which forms you need to file.

Practical takeaway: Create a checklist of all documents you need before attempting to file. Wait until you receive all forms from employers, banks, and other payers before filing your return. Filing too early with incomplete information may require you to file an amended return later.

Choosing Your Filing Status

Your filing status is one of the most important decisions when filing your 2021 return. There are five possible statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er). Your status determines your tax brackets, standard deduction amount, and which credits you can claim. Most people use their status as of December 31, 2021.

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Single status applies if you were unmarried on December 31, 2021, and did not qualify for another status. The standard deduction for a single filer in 2021 was $12,550. Married Filing Jointly applies if you were married to one person on December 31, 2021, and both spouses agree to file together. This status typically provides the lowest tax burden and highest standard deduction at $25,100. Many married couples benefit from filing jointly because it gives them access to certain credits and deductions that married filing separately does not.

Married Filing Separately is used by married couples who choose not to file a joint return. While this option exists, it typically results in higher taxes and restricts access to many credits. Some couples use this status if one spouse has significant tax issues or if they are in the process of divorcing. The standard deduction for married filing separately in 2021 was $12,550 for each spouse.

Head of Household status applies to unmarried people who paid more than half the costs of maintaining a home for themselves and a qualifying dependent for the entire year. Qualifying dependents typically include children, parents, or other relatives. The standard deduction for Head of Household was $18,800 in 2021, which is higher than Single status and may offer better tax results.

Qualifying Widow(er) status is available for two years after your spouse's death if you did not remarry and had a dependent child. This status provides similar tax benefits to Married Filing Jointly.

Practical takeaway: Take time to understand which status applies to your situation, as choosing the wrong one can cost you money through higher taxes or ineligibility for certain deductions and credits. If your status is complex—such as marriage or divorce during 2021—you may want to calculate your taxes under different statuses to see which produces the lowest tax liability.

Understanding Standard and Itemized Deductions

A deduction reduces the amount of income subject to taxes. Everyone can claim either a standard deduction or itemize deductions, but not both. The standard deduction is a fixed amount set by the IRS that varies by filing status and age. In 2021, the standard deduction for a single person under 65 was $12,550, while a married couple filing jointly was $25,100. If you were 65 or older, your standard deduction was higher by an additional $1,700 (single) or $1,350 per spouse (married filing jointly).

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The standard deduction is straightforward and requires no documentation. You simply claim the amount on your return and reduce your taxable income accordingly. For most taxpayers, using the standard deduction is simpler and results in lower taxes than itemizing.

Itemized deductions allow you to deduct specific expenses instead of the standard deduction. Common itemized deductions include mortgage interest, state and local property taxes, state and local income taxes, charitable donations, and medical expenses that exceed 7.5 percent of your adjusted gross income. To itemize, your total qualifying expenses must exceed your standard deduction to produce tax savings. For example, if you were single with a $12,550 standard deduction, your itemized deductions would need to exceed $12,550 to be worthwhile.

In 2021, there was a limit on state and local tax deductions (called the SALT cap). You could deduct no more than $10,000 in combined state and local income taxes and property taxes. This limit applied regardless of filing status. For taxpayers in high-tax states, this limit sometimes reduced the benefit of itemizing.

Medical expenses can be deducted if they exceed 7.5 percent of your adjusted gross income. For example, if your income was $50,000, only medical expenses above $3,750 could be deducted. This threshold makes it difficult for many people to benefit from medical expense deductions unless they had major medical events.

Practical takeaway: Before filing, add up your potential itemized deductions. If the total is less than your