Many people try to file a tax return early to start planning the rest of this year’s financial goals like car repairs and vacation. Filing your taxes as soon as possible can help you get a tax refund quickly. And if you owe money finding out early can give you time to plan.
When filing your taxes in 2021 you are filing a return for income earned in 2020. It gets confusing when 2020 and 2021 are used interchangeably to describe the same event. So be aware that when we talk about 2021, we’re really talking about 2020 income tax.
Related: Do You Need to File a Tax Return?
Here are the key details to know about filing taxes and answers to common tax questions.
Table of Contents
- When Can You file Your 2021 Tax Return?
- When is the Federal Income Tax Deadline?
- Why You Should File Your Tax Return as Early as Possible
- Other Income Tax Deadlines to be Aware Of
- Tax Estimates for the Self-Employed and Others with Additional Tax Liability
- Small Businesses
- What Tax Documents do I Need?
- How Do I File My Own Taxes?
- When Will I Receive My Tax Refund?
- 2020 Tax Return Tips
- Can I File My Taxes Now?
When Can You file Your 2021 Tax Return?
While you can prepare your income tax return any time after the end of the 2020 calendar year – providing you have all necessary documents and information – you may not be able to file the return immediately.
The IRS began accepting 2020 federal tax returns on February 12, 2021. Usually, tax season starts in January but is later this year because of the last-minute passage of the December 2020 COVID relief deal which includes a second stimulus check.
If you are ready to start preparing your return here’s where you can file for free.
When is the Federal Income Tax Deadline?
The federal income tax deadline is Monday, May 17, 2021. (normally it’s April 15th, the IRS announced the change on March 17th) Your state deadline may not have changed.
If you owe the IRS money with a tax liability, payment is due by this date to avoid penalties and interest.
You can file an automatic six-month tax extension using IRS Form 4868 if you need more time to prepare your taxes. The tax filing deadline for the extension is October 15, 2021.
However, if you owe money to the IRS penalty charges start on the regular deadline – even if you haven’t filed yet. If you think you may owe a tax liability, you can make an estimated payment before April 15 to minimize a tax penalty.
If you’re eligible to receive a tax refund, you can file after the deadline penalty-free, but tax prep may cost more as rates go up as filing deadlines approach.
April 15, 2021, is the due date for estimated taxes from January 1 to March 31, 2021. This was not moved to May 17th.
The state income tax deadlines vary by state and can be later than the federal deadline.
Why You Should File Your Tax Return as Early as Possible
While some taxpayers don’t even begin thinking about income tax filing until March – and for a few, not until April – that won’t be the best strategy for most taxpayers.
There are two primary reasons to file your tax return as early in the year as possible:
To get your refund as soon as possible. According to the IRS, the average income tax refund in 2020 was $2,476, and that doesn’t include any state income tax refund you may be entitled to. According to the IRS, refunds were issued to 123.4 million taxpayers, which is the vast majority of taxpayers in the country.
To minimize the possibility of income tax refund fraud. Scammers have found ways to file a fraudulent tax return using your personal information, which can include your name, Social Security number, and address. They’ll file a return very early in the year, claiming a large refund. By filing early, you’ll reduce the possibility of this happening. Here’s more about that.
On the first point, it’s also worth noting that the earlier you file during the tax season, the faster the return will be processed.
For example, if you file in February, you’ll likely receive your refund within two weeks. But if you wait until early April, it may be delayed as long as three or four weeks. That’s because processing times get longer as more returns are filed. By filing early, the stream of incoming returns at the IRS will be lighter.
Other Income Tax Deadlines to be Aware Of
Though the individual income tax filing deadline (normally April 15) and the extension filing date (October 15) are of importance to most taxpayers, there are other tax deadlines that will apply in 2021, just as in all other tax years. But those will apply primarily to the self-employed, small businesses, and anyone who expects owe additional tax.
Examples of individuals who may owe additional tax include the following:
- Full-time employees who also have a side business.
- Individuals who receive significant investment income.
- Social Security, pension and retirement distribution recipients (though withholding can usually be established with each income type).
- Recipients of a large amount of unemployment insurance. This will be especially important for the 2020 tax year since millions of Americans received both federal and state unemployment benefits at some time during the year.
- Anyone who receives a taxable windfall, such as from the sale of an investment property, undeveloped land, or a business asset.
Each of the above activities or events can result in an additional income tax liability, which will require the payment of tax estimates over and above any withholding you may have on your regular earnings from employment.
Tax Estimates for the Self-Employed and Others with Additional Tax Liability
The IRS expects taxpayers to pay additional tax liability in the quarter in which it’s earned. Many self-employed individuals who have their returns either professionally prepared or self-prepared using tax-preparation software, will have those estimates prepared in advance based on the previous year’s tax liability.
The due dates for the remainder of the 2020 tax year, and for the upcoming 2021 tax year are as follows:
- January 15, 2021 – the fourth and final tax estimate due for 2020.
- April 15, 2021 – the first tax estimate due for 2021. (did not change)
- June 15, 2021 – the second tax estimate due for 2021.
- September 15, 2021 – the third tax estimate due for 2021.
- January 15, 2022 – the fourth and final tax estimate due for 2021.
If you have a small business and file your business income and expenses on Schedule C of your individual 1040, your business and individual filing deadline will be the same – April 15, 2021.
But if you operate your business as either a partnership or an S corporation, you’ll be required to file a tax return for your business by March 15, 2021.
That will include an IRS Form 1065, U.S. Return of Partnership Income for partnerships, or IRS Form 1120-S, U.S. Income Tax Return for an S Corporation for a Subchapter S corporation.
If you can’t file either return by the deadline, you’ll have a six-month extension to file, which will move the due date out to September 15, 2021.
Since the income from both partnerships and S corporations flows directly through to your individual income tax return, neither business tax return will typically require payment of tax.
However, the reason why business tax returns are due to be filed at least 30 days before individual income tax returns is to give the individual taxpayer the final income numbers to report on his or her individual return. For that reason, filing an extension on a business tax return may also require getting an extension on your individual return – unless the business tax return will be filed before April 15.
What Tax Documents do I Need?
Here is a list of common forms you’ll need to prepare your taxes:
- Employment income (Form W-2 or Form 1099)
- Bank account interest (1099-INT)
- Investment income (1099-DIV, 1099-B, 1099-MISC, 1099-R)
- Social Security income (1099-SSA)
- Unemployment income (1099-G)
- Student loan interest payments (1098-E)
- Rental property income
Employers will mail their W-2 forms by January 31, 2021. Banks usually send their 1099-INT forms by January 31.
Online brokers may not complete your tax forms before mid-February. Each broker has different publishing deadlines and checking their tax center for the availability dates is your best option.
For less-common investments, the investment income reports on a Schedule K-1 instead of a 1099 form. Examples include real estate partnerships or oil and gas stocks that are a Master Limited Partnership (MLP). Most K-1 tax forms distribute in mid-March and come directly from the company you own shares of.
If you can itemize your taxes, you should also gather these tax documents:
- Charity donations (cash and non-cash)
- Home mortgage interest payments
- Local and state property taxes
- Childcare expenses
- Medical expenses
How Do I File My Own Taxes?
The easiest way to file your taxes is using online tax software.
Some of the most popular options include:
- TurboTax (see our TurboTax review)
- H&R Block
- TaxAct (see our TaxAct review)
- FreeTaxUSA (see our FreeTaxUSA review)
- Credit Karma Tax (see our Credit Karma Tax review)
TurboTax and H&R Block can be the most expensive if you don’t qualify for their free filing option. But these two platforms offer more tools and hands-on help, such as expert tax assistance.
Discount tax software has fewer features and can be a little more difficult to use than the pricier alternatives. However, you can get similar results and spend less money.
Should I Itemize My Taxes?
You would want to consider itemizing your taxes if your qualifying deductions exceed these amounts:
- Single or Married, filing separately: $12,400
- Married, filing jointly: $24,800
- Head of Household: $18,650
Can I File My Taxes for Free?
Yes, it’s possible to file your taxes for free. Most tax software only lets you file simple tax returns for free when you only have these tax details:
- W-2 income
- Retirement income
- Unemployment benefits
- Bank account interest
- Stock investment dividend income
Turbo Tax has a free version you can use if you have W-2 income, claim the standard deduction, have limited interest or dividend income, and qualify for the earned income or child tax credits.
H&R Block lets you file for free even if you have deductible student loan interest or similar education expenses.
Most platforms require you to pay if you earn freelancer/self-employment income reported on a Form 1099-MISC. You will also need to pay to file if you sell investments, cryptocurrency, or earn rental property income.
However, Credit Karma Tax lets you file complex returns for free, including self-employment income or sold investments. You pay $0 to file a federal and state tax return. This tax software also offers free audit defense.
Here’s our full list of where you can file your taxes for free or at a discount.
When Will I Receive My Tax Refund?
The IRS processes most tax refunds with 21 days of accepting e-filed tax returns or four weeks after mailing a paper tax return.
By law, the IRS cannot send the tax season’s first tax refunds until February 15, 2021. Those claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) won’t get their refund until the first week of March – at the earliest.
You can track your refund status on the IRS website.
Direct deposit into a bank account can be the quickest way to receive a refund. You can also receive your refund by paper check which takes longer to receive your funds.
You can contact the IRS to investigate your missing tax refund if it’s been longer than 21 days for e-file returns or six weeks for paper returns.
What is a Tax Refund Loan?
Some tax prep software offer “tax refund loans” or a “refund advance.” This interest-free loan usually between $500 and $4,000 of your federal tax refund amount and typically doesn’t have hidden fees – but always double-check.
The tax software loads the refund advance onto a prepaid debit card once the IRS approves your tax return and refund amount. Then, the IRS sends the refund to the tax preparer to pay off the advance.
Extra fees apply if you pay your tax prep fees with your tax refund instead of paying the fees upfront.
2020 Tax Return Tips
There are special tax situations this year due to the CARES Act and other stimulus measures. Here are a few temporary tax law changes to know about when you file your 2020 tax return.
The CARES Act passed in March 2020 was the first of two stimulus payments that went to taxpayers. The second round of stimulus payments went out in late December 2020.
These stimulus payments, also called a “recovery rebate credit” and “economic income payment,” are non-taxable. They are an advanced tax credit for the tax return you file in 2021.
You will report the total recovery rebate amount you received. If you only received partial credit, you receive the remaining amount when filing your taxes.
Another benefit of the CARES Act was a weekly $600 unemployment insurance boost. Stimulus funds also extended state unemployment benefits beyond the standard 26-week limit and for the self-employed too.
These federal unemployment benefits plus the standard state unemployment benefits are taxable.
Unemployment income reports on form 1099-G.
The tax form lists the total tax withheld if you chose to withhold income taxes upfront.
Most tax software lets you file for free if you received unemployment income. Your remaining tax situation must also qualify for the free filing option.
Need financial help because of the pandemic? Check out these coronavirus financial resources.
$300 Charitable Deduction
You must typically itemize to claim charitable tax deductions. But the CARES Act lets individuals deduct up to $300 in charity donations for the 2020 calendar year. Joint tax returns can only claim up to $300 for 2020 but up to $600 on their 2021 taxes.
To claim this above-the-line tax deduction, be sure to have documentation from the receiving charity—like a tax receipt.
Don’t miss these other overlooked CARES Act benefits.
Can I File My Taxes Now?
Yes, it’s possible to file your taxes now for the 2020 tax return. The IRS began accepting the first returns on February 12, 2021.
In addition to your regular tax documents, you may want to compile any tax forms for these special 2020 tax deductions and credits:
- Stimulus payments
- $300 above-the-line charity deduction
- Unemployment benefits
- Coronavirus-related retirement account distributions
Online tax software during the tax interview will ask if you have any of these tax situations. If you’re unsure what tax credits and tax deductions you qualify for, the tax prep software helps you find out.
If you owe a tax liability, consider making a traditional IRA contribution to reduce your taxable adjusted gross income. Individuals can make up to $5,000 ($6,000 if age 50 or older) in combined traditional IRA and Roth IRA annual contributions.
The IRA contribution deadline is April 15, 2021, for calendar year 2020 contributions. It is unclear if this deadline was extended when the filing deadline was extended.
Now that you know when you can file your 2020 tax return, it’s time to prepare your tax documents. Filing with online tax software can be the easiest way to complete most tax returns and more platforms offer tax expert packages that can be cheaper than hiring a tax preparer.