Essential Guide on How to File Federal Form 1040 Tax for Tax Year 2021

Filing a federal Form 1040 tax return for tax year 2021 is the standard process for reporting income and determining how much tax you owe or the refund you may receive. Since the IRS discontinued Form 1040EZ and Form 1040A after 2018, all taxpayers now use Form 1040 or, for seniors 65 and older, Form 1040-SR. This individual income tax return applies to eligible taxpayers across different filing statuses and income levels, making it the foundation of the federal tax system.

The Internal Revenue Service introduced a simplified structure where the main Form 1040 handles most tax situations, while schedules 1, 2, and 3 are added only when necessary. This approach reduces complexity and ensures taxpayers can file accurately, whether they report wages, claim dependents, or apply for a tax credit. Understanding how to prepare this form correctly helps you avoid common mistakes and ensures you meet all requirements set by tax departments.

This guide provides clear instructions for taxpayers on how to file, what forms and schedules may apply, and how to calculate payments or refunds. Whether you e-file using IRS Free File, work with tax preparers, or submit a paper return, the goal is to help you qualify for the credits and deductions you deserve while following the rules for federal returns.

Understanding Form 1040 (2021 Edition)

Form 1040 is the standard individual income tax return that all taxpayers must use for federal tax purposes. The IRS streamlined this form in tax year 2018 by eliminating the old Form 1040EZ and Form 1040A. Since then, eligible taxpayers across all income levels and filing statuses rely on the exact schedules and base form to report income, claim credits, and calculate tax.

What Replaced Form 1040EZ and Form 1040A

• Form 1040EZ and Form 1040A were discontinued after 2018.
  
  
• All taxpayers now use the redesigned Form 1040 or Form 1040-SR for seniors.
  
  
• The simplified system allows the IRS to provide one federal return that adapts to complex, straightforward tax years.

The Building Block System

The IRS uses a modular design for the current Form 1040:

• Form 1040: The main federal tax form with basic lines for income, deductions, and credits.
  
  
• Schedule 1: Reports additional income, such as business income, unemployment compensation, and deductions such as student loan interest.
  
  
• Schedule 2: Covers additional taxes, including self-employment tax and the alternative minimum tax.
  
  
• Schedule 3: Used for other credits and payments, including education credits and estimated fees.

Form 1040 vs. Form 1040-SR

• Form 1040-SR is available for taxpayers age 65 and older.
  
  
• It contains the exact schedules and instructions as Form 1040.
  
  
• The main difference is the larger print, more straightforward layout, and standard deduction chart printed on the first page.

Who Must File Form 1040 for 2021

Taxpayers must file if their gross income meets the thresholds below. The income levels vary by filing status and age.

These thresholds are based on the standard deduction for tax year 2021. Taxpayers may also need to file a tax return if other criteria apply, such as owing special taxes, claiming refundable credits, or reporting health care marketplace coverage through Form 1095-A.

Key Changes for Tax Year 2021

The IRS introduced several updates for tax year 2021 that directly impact how taxpayers file their federal returns. These updates include new credits, expanded family benefits, and revised deadlines. Understanding these changes ensures eligible taxpayers can claim the full benefits available.

Recovery Rebate Credit (Third Stimulus Payment)

• Taxpayers who do not receive the full third stimulus payment may claim the difference as a Recovery Rebate Credit on their 2021 income tax return.
  
  
• For example, if you qualified for a $1,400 payment but received only $1,000, you may claim the additional $400 when you file.
  
  
• The credit is applied directly to your tax return, reducing the amount of federal tax owed or increasing the refund due.

Expanded Child Tax Credit

• The Child Tax Credit increased to $3,600 for children under age six and $3,000 for children ages six to seventeen.
  
  
• The credit was fully refundable for many taxpayers, meaning families could receive the benefit even without owing income tax.
  
  
• Many households received advance monthly payments from July through December 2021, which must be reconciled when filing.

Standard Deduction Amounts for 2021

• The standard deduction was $12,550 for single filers or married individuals filing separately.
  
  
• Married couples filing jointly or qualifying widows and widowers could claim $25,100.
  
  
• The deduction for head of household status was $18,800.
  
  
• An additional deduction of $1,350 was available for each spouse age 65 or older, or $1,700 if filing as single or head of household.

Key Filing Dates for 2021 Returns

• The federal filing deadline was April 18, 2022, adjusted for a holiday.
  
  
• The extension deadline was October 17, 2022, giving taxpayers additional time to file but not to pay.
  
  
• IRS Free File opened on January 14, 2022, allowing early preparation of returns.
  
  
• The IRS began officially processing returns on January 24, 2022.

Step-by-Step Filing Guide

If followed step by step, filing a federal Form 1040 tax return for 2021 becomes manageable. These instructions help taxpayers prepare correctly, meet IRS requirements, and avoid unnecessary mistakes. 

Step 1: Gather Required Documents

• Collect Form W-2 from every employer you worked for in 2021.
  
  
• Gather all Form 1099s that report income from dividends, interest, self-employment, or retirement distributions.
  
  
• Have Social Security cards for all dependents and children listed on your tax return to avoid processing errors.
  
  
• Prepare bank routing and account numbers to enable direct deposit of any refund.
  
  
• Review your prior years’ tax returns to carry over information that may still apply.
  
  
• Include Form 1095-A if you purchased health insurance through the marketplace exchange.
  
  
• Organize records of estimated tax payments made during the year.

Step 2: Choose Your Filing Status

• Select Single if you are unmarried and do not qualify for another status.
  
  
• Choose Married Filing Jointly if you are married and wish to combine your income with your spouse on one return.
  
  
• Consider Married Filing Separately if you and your spouse prefer to file individual returns, though this usually results in higher taxes.
  
  
• Select Head of Household if you are unmarried, paid more than half the cost of your household, and have a qualifying dependent.
  
  
• Use Qualifying Widow(er) if your spouse passed away in the last two years and you are caring for a dependent child.

Step 3: Complete Personal Information and Dependents

• Enter your legal name, Social Security number, and current address exactly as they appear on official records.
  
  
• Provide details for each dependent, including their name, Social Security number, and relationship to you.
  
  
• Indicate whether the dependent qualifies for the Child Tax Credit or the Credit for Other Dependents.

Step 4: Report Income

• Report wages, salaries, and tips as shown on your W-2.
  
  
• Include taxable and tax-exempt interest received during the year.
  
  
• Report both qualified dividends and ordinary dividends from investments.
  
  
• List IRA distributions, pensions, and annuities as taxable income when required.
  
  
• Record Social Security benefits, noting that a portion may be taxable depending on your total income.
  
  
• Add any other taxable income as required by IRS instructions.

Step 5: Standard Deduction or Itemized Deductions

• Most taxpayers use the standard deduction, which for 2021 was set by filing status.
  If your allowable expenses, such as mortgage interest, charitable contributions, or medical costs, exceed the standard deduction, you should consider itemizing deductions.

Step 6: Apply Credits and Adjustments

• Apply the Recovery Rebate Credit if you have not received your full stimulus payment.
  
  
• Claim the Child Tax Credit or Additional Child Tax Credit if you qualify.
  
  
• Use the Earned Income Credit if your income and family meet eligibility requirements.
  
  
• If you have paid qualifying tuition or fees, you can apply for education credits, such as the American Opportunity Credit.
  
  
• Review other credits that may apply based on your personal situation.

Step 7: Calculate Tax and Total Liability

• Use the IRS tax tables or the tax computation worksheet to calculate the amount of federal tax you owe.
  
  
• Subtract all credits and payments you have already made during the year.
  
  
• The result will show whether you need to make a payment or are due a refund.

Filing Methods: E-File vs. Paper Filing

Taxpayers may file electronically or submit a paper return by mail. The IRS strongly encourages e-filing because it improves accuracy and speeds refund processing.

Benefits of E-Filing

• Your refund is processed within three weeks, compared to six to eight weeks for paper returns.
  
  
• The e-file system includes error checks that reduce the likelihood of mistakes.
  
  
• Direct deposit of refunds is available, which provides faster access to funds.
  
  
• You receive immediate confirmation that the IRS has received your return.

IRS Free File Program

• The Free File program is available to eligible taxpayers with an adjusted gross income of $73,000 or less for 2021.
  
  
• The program offers free brand-name tax software to prepare and e-file your federal return.
  
  
• Some software providers also include free preparation of state tax returns.

Free File Fillable Forms

• The IRS also offers Free File Fillable Forms, which are available regardless of income level.
  
  
• These electronic forms are essentially online versions of the paper forms with built-in calculations.
  
  
• They are best suited for taxpayers who are comfortable preparing their return without guided assistance.

Paper Filing

• Taxpayers filing on paper must print, sign, and date the completed Form 1040 and attach all schedules.
  
  
• Paper filers must include copies of W-2s and other required forms to support their tax return.
  
  
• Returns must be mailed to the correct IRS address in the official instructions.
  
  
• Paper returns take longer to process, and errors are more difficult to correct once submitted.

Payment Options and Refunds

After completing your income tax return, you will owe additional federal tax or be entitled to a refund. The IRS provides several secure payment methods and flexible options if you cannot pay the full amount simultaneously.

If You Owe Tax

• You can use IRS Direct Pay to transfer funds directly from your checking or savings account at no cost.
  
  
• You may pay using the Electronic Federal Tax Payment System (EFTPS), a secure government service that allows you to schedule payments in advance.
  
  
• Credit and debit card payments are accepted through IRS-approved processors, although additional fees may apply.
  
  
• Many banks allow you to use their bill pay service to send payments directly to the Internal Revenue Service.
  
  
• If you mail a check or money order, you must use Form 1040-V, the payment voucher, and include your Social Security number and tax year on the payment.

If You Cannot Pay in Full

• A short-term payment plan may be available if you can pay your balance within 180 days, although setup fees may apply.
  
  
• A long-term installment agreement allows you to make monthly payments, but interest and fees are added until the full balance is paid.
  
  
• In limited cases, you may request an Offer in Compromise, which allows you to settle your federal tax debt for less than the full amount owed if you meet strict eligibility criteria.

Refunds

• Taxpayers who overpaid during the year or qualify for refundable credits will receive a refund.
  
  
• Refunds can be deposited directly into your checking or savings account, which is the fastest and most secure method.
  
  
• You may split your refund across multiple accounts or apply part to purchase U.S. savings bonds using Form 8888.
  
  
• If you prefer, the IRS will mail a paper check, although this method can take several weeks to process.

Required Schedules and Attachments

Not every taxpayer will need to complete additional schedules with Form 1040. However, certain types of income, credits, or taxes require additional forms to be filed with your federal return.

Schedule 1: Additional Income and Adjustments

• Schedule 1 is required if you receive unemployment compensation, business income, prize winnings, or alimony.
  
  
• It also claims income adjustments such as student loan interest, educator expenses, or IRA contributions.

Schedule 2: Additional Taxes

• Schedule 2 is required if you owe the alternative minimum or self-employment tax.
  
  
• You must also use this schedule if you owe additional taxes on retirement plans or if you employ household workers.

Schedule 3: Additional Credits and Payments

• Schedule 3 allows taxpayers to claim credits such as the foreign tax credit, education credits, or the general business credit.
  
  
• It also reports estimated tax payments or amounts paid with an extension request.

Other Common Forms and Attachments

• Schedule A is used for itemized deductions, such as mortgage interest and medical expenses.
  
  
• Schedule B is required for interest and dividend income above certain thresholds.
  
  
• Schedule C reports business income or loss if you are self-employed.
  
  
• Schedule D reports capital gains and losses from the sale of investments.
  
  
• Form 8962 is required if you received advance payments of the premium tax credit for health insurance.
  
  
• Form 8888 allows you to split your refund into multiple accounts or purchase savings bonds.

Common Mistakes to Avoid

Many processing delays and IRS notices result from small but common errors made on income tax returns. Taking the time to double-check your Form 1040 before filing can help avoid these issues.

Mathematical and Calculation Errors

• Taxpayers often make mistakes when transferring figures or adding totals, especially when using paper forms.
  
  
• Incorrect tax calculations can delay processing, as the IRS must manually review and correct errors.
  
  
• Using e-file software helps reduce the risk of math-related mistakes by performing automatic calculations.

Filing Status Errors

• Choosing the wrong filing status can significantly change your standard deduction and tax brackets.
  
  
• Taxpayers sometimes incorrectly claim Head of Household when not meeting the eligibility criteria.
  
  
• Married couples should calculate joint and separate returns to determine which filing method results in the lowest federal tax owed.

Incorrect Social Security Numbers

• An error in Social Security numbers for taxpayers or dependents may cause a return to be rejected.
  
  
• The IRS will not process the Child Tax Credit if the dependent information does not precisely match Social Security Administration records.

Missing Signatures and Dates

• Paper returns must be signed and dated before mailing, or the IRS will consider them incomplete.
  
  
• If filing jointly, both spouses must sign the return to ensure it is accepted.

Bank Account Errors

• Incorrect bank routing or account numbers can cause direct deposit refunds to be delayed or misdirected.
  
  
• Always confirm your banking information before submitting an e-file or mailing a paper return.

Missing Attachments

• Taxpayers frequently forget to include required schedules or forms, which may cause processing delays.
  
  
• Paper filers must also attach copies of W-2 forms and other documents showing income and withholding.

Special Situations and First-Time Filer Tips

Some taxpayers have circumstances that require extra attention when filing. Others may be completing their very first individual income tax return. The following guidance helps ensure accurate filing and prevents missed opportunities for refunds or credits.

Filing with Little or No Income

• Even if your income was minimal in 2021, you may still need to file a federal return if you received advance payments of the Child Tax Credit or Premium Tax Credit.
  
  
• You should also file if federal income tax was withheld from your paycheck and you want to claim a refund.
  
  
• Filing can qualify you for refundable credits, such as the Earned Income Credit, even if you owe no tax.

Benefits of Filing Even When Not Required

• Filing creates a tax record useful for loan applications or government benefit programs.
  
  
• Submitting a return starts the statute of limitations, which limits how long the IRS can review or audit that tax year.
  
  
• Claiming refundable credits may result in receiving money back even if you had little or no income.

Tips for First-Time Filers

• Gather all your documents before starting, including W-2s, 1099s, and bank information for direct deposit.
  
  
• Review the basic rules for filing status, standard deductions, and tax credits so you understand how they apply.
  
  
• Decide whether you will prepare the return, use e-file software, or work with tax preparers.
  
  
• Set up direct deposit to receive any refund quickly and securely.

Special Notes for Young Adults and Students

• If you are a student, confirm whether your parents can still claim you as a dependent before filing.
  
  
• Review education-related credits, such as the American Opportunity Credit, which may help reduce your tax liability.
  
  
• If you worked multiple part-time jobs, include every W-2 to avoid underreporting income.
  
  
• Keep copies of your income tax return for future reference, especially if you establish credit or apply for financial aid.

Frequently Asked Questions

How do you file the federal Form 1040 tax for the 2021 tax year?

To file a federal Form 1040 tax return for 2021, taxpayers must gather income documents, dependents’ details, and required schedules. You can prepare the tax return using IRS Free File, e-file software, or paper forms mailed to the correct address. Following IRS instructions ensures you calculate federal tax accurately, claim every tax credit you qualify for, and securely include full payment or request a refund through systems showing the locked padlock icon.

What is included in an individual income tax return?

An individual income tax return is the official document taxpayers file with the Internal Revenue Service each year to report income, deductions, and credits. It includes the base Form 1040 and any required schedules. The return allows taxpayers to calculate their federal tax liability, determine if they have paid enough during the year, and claim refunds or additional credits when eligible.

Can tax preparers or tax departments assist with filing?

Tax preparers and tax departments can help taxpayers prepare a federal return, especially when multiple forms, dependents, or complex schedules are involved. They ensure that eligible taxpayers qualify for all applicable credits and that the income tax return meets IRS requirements. While Free File and e-file services provide free options for simpler cases, professional support may be worth the cost for more complicated tax years or prior years.

What options does the Internal Revenue Service provide for filing?

The Internal Revenue Service offers several options for filing a tax return. Eligible taxpayers can use Free File software to e-file a federal return at no cost, or they may prepare paper forms and mail them to the correct IRS address. For prior years, only paper returns are accepted. The locked padlock icon indicates that IRS systems are secure, protecting income and payment information during electronic submission.

How do taxpayers claim a tax credit on Form 1040?

To claim a tax credit on Form 1040, taxpayers must complete the relevant lines and attach schedules if IRS instructions require. Credits such as the Child Tax Credit or education credits reduce the full amount of federal tax owed. Eligible taxpayers may qualify for refundable credits, which result in a payment even if no tax is due. Accurate forms ensure the IRS processes the claim correctly and promptly.

Can taxpayers still file prior years’ tax returns?

Yes, taxpayers can still file prior years’ income tax returns, but each year must be filed separately using the proper forms, instructions, and schedules that applied for that tax year. Prior year returns must be mailed to the correct IRS address, as they cannot be e-filed. Filing prior years' tax returns may enable eligible taxpayers to claim refunds or credits; however, deadlines apply, and other criteria may restrict refund eligibility.

How does reporting dependents and children affect a tax return?

Reporting dependents and children on an income tax return may qualify taxpayers for valuable credits. Credits include the Child Tax Credit and the Credit for Other Dependents, which directly reduce federal tax owed. To claim these credits, you must prepare Form 1040 accurately, provide Social Security numbers, and meet eligibility requirements. Correctly including dependents ensures you calculate the full amount of credit you are entitled to and receive payment or refund benefits.