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​​​​​​​​Welcome to the LSNJLAWSM website, provided by Legal Services of New Jersey (LSNJ). LSNJ is a 501(c)(3) nonprofit offering free legal advice to low-income people in New Jersey. Find legal information by clicking on a legal topic or typing a few words into the search box. ​

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Taxes
Understanding Your 2021 Taxes
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Tax season officially began January 24, 2022. This article will help you understand some tax filing changes for 2021, provide general filing information, and answer common taxpayer questions. It is expected to be a very busy tax season due to recent tax law changes, including COVID-19 relief programs and eligibility changes for some benefits. Be sure to prepare as soon as possible to avoid delays in your refund.

The deadline to file federal taxes for the 2021 tax year is April 18, 2022. Failure to file a tax return, or to request an extension for time to file your tax return, may result in added penalties and interest.

Save money. Get your taxes done for free.

The average cost to prepare a simple tax return is approximately $175. If your current income is below $58,000 (some sites may go higher), you likely qualify for free tax preparation assistance. Among the programs in New Jersey that provide free services from a tax professional is the Volunteer Income Tax Assistance program. See How can I get my taxes done for free? for more information about VITA.

What if I don’t qualify for free tax assistance?

If you do not qualify for free tax assistance and do not feel comfortable filing your own return, you may pay someone to prepare your tax return. Be very careful! You are legally responsible for what is on your return, even if it wasn’t prepared by you. While there are many honest and professional tax preparers, there are some who are not well trained or may be fraudulent. Choose a preparer carefully and don’t be afraid to ask questions.

Here are some tips: (1) Use a preparer who signs the return and includes their preparer tax identification number. (2) Ask about their educational background and professional affiliations. Confirm they are licensed and check for any disciplinary actions with the state board of accountancy for certified public accountants. (3) Avoid preparers whose fees are based upon a percentage of your refund. (4) Make sure any refund due is deposited in full into your bank account, or mailed to you as a check. (5) Never sign a blank return. Always review the information carefully before signing. (6) Keep a copy of the return for your records.

How to Avoid Delays to your Refund

The IRS issues most refunds within 21 days of receiving a tax return. However, due in part to COVID-related issues, the IRS is significantly behind in processing returns. There are things you can do to maximize your chances of receiving your refund quickly.

  1. File electronically instead of filing a paper return.
  2. Use the IRS Free File program.
  3. Check your numbers carefully.
  4. Opt to receive your refund through direct deposit. This is usually quicker than waiting for a paper check.

Should I consider a refund anticipation loan?

No. This time of year, especially with the financial impact of COVID-19, tax preparation businesses heavily advertise offers to “get your refund early.” These are not instant refunds issued by the IRS. They are loans, secured by your tax refund, and the lender will likely add high fees and interest rates. The fees and interest are deducted from your refund, and you won’t get the full amount of the refund to which you are entitled. It is better to be patient and wait for your full refund. In most cases, if you file your return electronically and choose direct deposit, you should get your return within two to three weeks.

Do I have to file a return?

Whether you are required to file a tax return and what amount of taxable income you can earn are questions that depend on your age, filing status, and gross income. The amount of taxable income you can earn before you are required to file a tax return is called a filing threshold. Use the table below to see if you are required to file a federal tax return. You can also see Do I Need to File a Tax Return? (from IRS.gov) to check whether you have a filing requirement.


2021 Filing Requirements Chart For Most Taxpayers

IF your filing status is. . .

AND at the end of 2021 
you were. . .

THEN file a return if your gross income was at least. . .

Single

under 65

$12,550

65 or older

$14,250

Married filing jointly

under 65 (both spouses)

$25,100

65 or older (one spouse)

$26,450

65 or older (both spouses)

$27,800

Married filing separately
(see the instructions for Form 1040)

any age

$5

Head of household
(see the instructions for Form 1040)

under 65

$18,800

65 or older

$20,500

Qualifying widow(er)
(see the instructions for Form 1040)

under 65

$25,100

65 or older

$26,450

Note: If you were born before January 2, 1957, you are considered to be age 65 at the end of 2021.


Consider filing a return even if you do not have to

If you did not receive your Economic Impact Payment (EIP), you should file a 2021 Form 1040 to claim the Recovery Rebate Credit (RRC). There was one EIP (the third) issued in 2021. The RRC is another way  for you to receive your EIP. Generally, you are eligible to claim the RRC if you were a U.S. citizen or U.S. resident alien in 2021, cannot be claimed as a dependent of another taxpayer for tax year 2021, and have a Social Security number valid for employment that was issued before the due date of your 2021 tax return. You can still receive up to $1,400 for a qualified dependent claimed on your return, even if you do not have a valid Social Security number. But you must meet all the other eligibility and income requirements.

You must file Form 1040 or Form 1040-SR to claim the Recovery Rebate Credit even if you are normally not required to file a tax return. Be on the lookout for IRS letters 6475 and 6419, which are being mailed out now. These letters will tell you how much money you received according to IRS records and explain how to claim credits for funds you are owed. Using these forms to prepare your return may ensure your return is accurate.

How can I prepare my taxes for free?

Anyone with income of $73,000 or less can file their federal tax return electronically for free through the IRS Free File program. Free File is a public-private partnership between the IRS and many filing and tax preparation software providers. The cost is free if you are eligible. The quickest way to get your tax refund is to combine electronic filing with direct deposit.

Do not earn enough to have to file?

Even if you do not make enough money to have to file a tax return, you should consider filing one. If you are working, but your income is low, you are probably eligible for a refund of taxes withheld from your paycheck during the year. There are also other tax credits for which you might be eligible. For example, the Earned Income Tax Credit (EITC) is a valuable credit you may qualify for if you have low income and are working, or have “earned” credit. A tax refund means that the IRS will be returning money to you. If you don’t file a return, you won’t get money back that you are entitled to. This tax season, there are several COVID-related benefits available such as the Additional Child Tax Credit and expansion of eligibility for the Economic Impact Payments that may mean significant money in your pocket.

What if I am unable to file my tax return on time?

If you are unable to file by the deadline (April 18, 2022), you may file for a six-month extension by completing IRS Form 4868. Extension requests are automatically granted, giving you until October 17, 2022 to file. Note that that this is only an extension of the time to file, and will not extend your time to make a payment if you owe the IRS at the end of the year. This means if you are self-employed and make estimated tax payments on a quarterly basis, you should still estimate your tax liability for 2021, and pay any amount due. Failure to do so may result in a penalty. If you do not have the money to pay what you owe, file the extension request to avoid a late-filing penalty and possible interest on late-payment penalties.

How do I find out the status of my tax refund?

You can instantly check the status of your refund at Refunds (from IRS.gov). Just input your Social Security number, filing status (explained below), and exact refund amount as stated on your filed return. Filing electronically will yield a faster refund.

What does filing status mean?

“Filing status” is a term used by the IRS to determine your tax filing obligations, standard deductions, and eligibility for certain credits and deductions. It is based mainly upon marital status and family situation. There are five types of filing status: Single, Married Filing Jointly, Married Filing Separately, Head of Household (HOH), and Qualifying Widow(er). Your marital status on the last day of the year determines your filing status for the entire year. Choose single filing status if you are divorced or legally separated according to state law. Head of household generally applies to taxpayers who are unmarried. To qualify for HOH status, you must have paid more than half the cost of maintaining your household for yourself and a qualifying person. For more information about filing status, see IRS Publication 501: “Exemptions, Standard Deductions and Filing Information.” 

What Is The Earned Income Tax Credit (EITC)?

The EITC is one of the most valuable credits because it is fully refundable. This means that you will still get money back, even if you did not owe any tax. See the table below. The amount of the EITC depends upon income and family size. You must meet the following requirements in order to claim the EITC. You must:

  • Have worked and earned income under $57,414.
  • Have a valid Social Security number by the due date of your 2021 return (including extensions).
  • Be a U.S. citizen or a resident alien all year.

See below for a summary of the guidelines and maximum credits available under the EITC. You may see Earned Income and Earned Income Tax Credit (EITC) Tables (from IRS.gov) for more information. You can also check your eligibility online by going to EITC Assistant (from IRS.gov).

EITC Limits for Tax Year 2021

Children or Relatives Claimed 
Maximum AGI*
Single/Head of Household, or Widowed
Maximum AGI*
Married Filing Jointly

 

Maximum
Credit

 

No qualifying children

$21,430

$27,380

$1,502

One qualifying child

$41,756

$48,108

$3,618

Two qualifying children

$46,440

$53,865

$5,980

Three or more qualifying children

$50,594

$57,414

$6,728

* adjusted gross income

How can I get my taxes done for free?

IRS Free File Program. This program makes commercial tax preparation software available to low-income taxpayers at no cost. If you had less than $73,000 in adjusted gross income (AGI) in 2021, these programs will help you complete and file your tax return at no cost. Go to Free File (from IRS.gov). You will need to select the tax software that best suits your needs. Once you choose a preparer, you will leave the IRS website and be taken to the commercial preparer’s site. Based upon your answers to income and family questions, a tax return will be prepared on your behalf and filed electronically. Note, this may not be an option for filing your state tax return, so you may want to consider one of the other in-person tax preparation options listed below.

Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE). The VITA program generally offers free tax preparation services to people with incomes below $58,000. In addition, the TCE program offers free tax help for all taxpayers, particularly those age 60 and older, specializing in questions about pensions and retirement-related issues unique to seniors. VITA and TCE sites are staffed with volunteers trained to prepare both federal and state returns and are located at libraries, senior centers, and other community centers. Due to COVID, some VITA and TCE centers may be closed. However, both programs are planning to have virtual and drop-off options as a way to remain COVID safe while providing free tax preparation for low-income individuals. For the latest status on services near you, call 1-800-906-9887, or or visit Get Free Tax Prep Help (from IRS.gov).

These centers are starting to open in New Jersey. You should contact sites as soon as possible to find out how to make an appointment. As the April 18, 2022 deadline approaches, these sites become busier and you might not be able to secure an appointment.

What should I bring to my VITA or TCE appointment?

Save time by being prepared for your appointment with VITA or TCE. You should start collecting your records now, including but not limited to:  photo ID, Social Security cards, wage and earning statements from all employers (Form W-2, W-2G, 1099-R,1099-Misc), a copy of last year’s return, healthcare coverage forms (1095-A,B and C). For a comprehensive list or more information, visit What to Bring to Your Local VITA or TCE Site (from IRS.gov).

The sooner you file an accurate return the sooner you will receive your refund. Again, the IRS is experiencing significant delays, so file electronically and choose direct deposit for receiving your refund. If you have further questions, feel free to call LSNJ’s Tax Legal Assistance Project at 732-572-9100. ​​​​

2/2/2022