IRS Issues Important Reminders for Filing Income Tax Returns in 2021

Each tax season, the Internal Revenue Service (IRS) publishes a number of important reminders for U.S. taxpayers living domestically and abroad. For the 2021 tax season, the IRS is encouraging taxpayers to ensure that they have all of the documentation they need to file complete returns, and it has provided some tips for taxpayers to avoid other mistakes as well. Here US International Tax Advisors provides an overview of some of the key information taxpayers need to know:

Double-Check for Missing or Incorrect W-2s or 1099s

When filing their annual income tax returns, U.S. taxpayers must ensure that they have all necessary documentation to substantiate their claimed income. For most individuals, this means submitting copies of their W-2s, 1099s or both. As the IRS states, “taxpayers who haven't received a W-2 or Form 1099 should contact the employer, payer or issuing agency directly to request the missing documents before filing their 2020 federal tax return.”

Taxpayers who do not receive a W-2 or 1099 before Tax Day will need to file Form 4852 or Form 1099-R in order to submit a complete return. If a taxpayer who files Form 4852 or Form 1099-R receives a W-2 or 1099 after Tax Day, the taxpayer must double-check his or her filing and submit Form 1040-X if necessary.

More Tips for Filing Accurate Returns

When it comes to filing accurate returns, making sure taxpayers’ returns match their W-2s and 1099s is just one small part of the process. The IRS is also encouraging taxpayers to carefully consider the following when preparing their income tax returns in 2021:

• Are you planning to take a home office deduction? If you are, you need to make sure your home office qualifies, and you need to calculate your deduction appropriately.
• Are you planning to claim the Earned Income Tax Credit (EITC)? If you are, you need to make sure you are eligible to do so.
• Did you receive unemployment compensation in 2020 (due to the economic impacts of the COVID-19 pandemic or otherwise)? If so, you will need to pay tax on your unemployment benefits if you did not elect to have taxes withheld from your monthly payments.
• Did you receive an interest payment along with your 2019 tax refund? If so, this interest payment is taxable income that you need to report on your 2020 return.
• Did you join the gig economy in 2020? If so, did you make estimated quarterly tax payments? Independent contractors and small businesses have tax obligations that are unique from those of employees, and failure to comply can lead to an IRS audit or investigation once you file your return.

The IRS is encouraging taxpayers to carefully evaluate their obligations with regard to cryptocurrency and offshore accounts as well.

Contact US International Tax Advisors

Of course, this is far from everything you need to know when it comes to filing an accurate income tax return and mitigating your risk of facing an IRS audit or investigation. If you have questions or concerns, you should consult with an attorney promptly. To request a confidential consultation with US International Tax Advisors, call 844-796-8565 or contact us online today.