How to File Your Alabama Tax Return 2021: A Step-by-Step Guide

Filing your Alabama tax return for 2021 is still essential, even if the original deadline has passed. Whether you lived in Alabama full-time, earned income from an Alabama-based job, or ran a small business in the state during 2021, you may still need to file a state tax return to stay compliant and avoid penalties.

Many taxpayers assume that filing their federal return with the IRS is enough. However, it's essential to know how things work at the state level because Alabama has its rules, forms, and credits for income tax. This includes knowing which form to use, calculating your exemptions and deductions, and knowing how to e-file or mail your return to the Alabama Department of Revenue.

This guide walks you through every step of how to file your Alabama tax return for 2021, from figuring out if you're required to file to choosing the proper form, calculating what you owe (or what you’re owed), and submitting your return. You’ll also learn how to make a payment, track a refund, and avoid common mistakes that could delay processing. Even if you missed the original due date, Alabama offers a six-month extension to file. You can complete your return and stay on track with the proper documents and guidance.

Who Must File an Alabama Tax Return for 2021

Filing an Alabama tax return for the 2021 tax year is required if you lived in Alabama or earned income from an Alabama-based source during that year. Your filing responsibility depends on both your filing status and your gross income.

1. Income Thresholds Based on Filing Status

If your gross income in Alabama is at least the following amounts, you must file a 2021 income tax return:

• Single: You must file if you earned $4,600 or more during the year.
  
  
• Married Filing Jointly: If your combined income with your spouse was $10,500 or more, you must file.
  
  
• Married Filing Separately: You must file if your income was $4,600.
  
  
• Head of Family: You are expected to file if your gross income reaches $7,700 or more.

These rules apply to all income types, including wages, contract work, self-employment, and investment income.

2. Residency Status Determines What Income You Report

• Full-year residents must report all income received in 2021, regardless of where it was earned.
  
  
• Part-year residents are required to report only the income earned while living in Alabama.
  
  
• Nonresidents must file if they earned income from any Alabama source, such as wages, business income, or rental properties.

For instance, if you lived in another state but worked remotely for a company based in Montgomery, you’d need to file a nonresident return using Form 40NR.

3. Situations Where Filing Is Still Recommended

Even if you are not required to file, doing so may benefit you in the following cases:

• You had Alabama tax withheld from your paycheck and want to claim a refund. Filing allows you to request any overpaid amount.
  
  
• You qualify for a state tax credit. Some tax credits are only available if you file a return.
  
  
• You need proof of income for a financial institution. Filing can help when applying for loans or verifying eligibility for programs.
  
  
• You submitted a federal return. Filing with Alabama ensures your state and federal return records match.

In summary, many taxpayers are required to file a return because of income thresholds or income sourced from Alabama. Others choose to complete a return to access refunds or credits or to maintain proper records with the Alabama Department of Revenue.

Alabama Tax Rates and Exemptions for 2021

If you earned income in Alabama during the 2021 tax year, your state tax liability depends on your taxable income and available exemptions. Alabama uses a graduated tax system, which means your tax rate increases as your income rises.

Tax Rates for 2021

For individual filers, Alabama applied the following income tax rates:

• 2% on the first $500 of taxable income
  
  
• 4% on the next $2,500 of taxable income
  
  
• 5% on any taxable income over $3,000

These rates are the same for all filing statuses, but your standard deduction, exemptions, and credits may differ.

Personal and Dependent Exemptions

Alabama provides personal exemptions based on your filing status:

• $1,500 for Single and Married Filing Separately
  
  
• $3,000 for Married Filing Jointly and Head of Family

You may also claim a $300 exemption for each dependent. You must prepare and submit Schedule DS with your return to do this. Be sure to sign and include all required forms before submission.

Standard Deduction Guidelines

Alabama allows a standard deduction based on your income and filing status. The deduction is 20% of adjusted gross income for most individuals, capped at $2,000 (or $4,000 for joint filers). You may obtain a larger deduction if your income is lower, but eligibility must meet the state’s calculation rules.

It’s essential to check your federal return before applying these deductions to your Alabama forms, especially if you itemized at the federal level. The Alabama Department of Revenue offers free guidance and publications on its official website page if you're unsure which method results in a lower tax liability.

Additional Notes and Warnings

• Note that Alabama allows a deduction for federal income taxes paid, but not taxes withheld.
  
  
• Failure to report income or exemptions accurately may result in a notice of underpayment.
  
  
• If you need assistance, visit the Department of Revenue or work with tax services authorized to file on your behalf.
  
  
• Some tax companies may charge fees, but many offer complimentary services through state-approved programs.
  
  
• Review all details thoroughly before submission to avoid delays in completion or refunds you may be eligible to receive.
  
  
• If you mail your return, use the correct address provided by the state for your filing type.

Choosing the Right Alabama Tax Form

One of the most important things to do when filing your Alabama tax return is to pick the proper form. The Alabama Department of Revenue gives you different forms depending on your income type, where you live, and whether you plan to itemize your deductions. Filing the wrong form could take longer or cause mistakes when handling your return.

Form 40 – Standard Individual Income Tax Return

Use Form 40 if you have a more complex tax situation. This form is designed for individuals who plan to itemize deductions, report business income, claim tax credits, or include additional attachments. It’s also appropriate if you received income from multiple sources, such as self-employment, rental properties, or investments. Before submitting this form, ensure all your income and deductions are correctly calculated and reviewed.

Form 40A – Short Form Return

If your income is straightforward, Form 40A may be a better fit. This form is meant for individuals who take the standard deduction and earn income solely from wages or salaries. You should not use this form if you have business or extensive investment income or must report itemized deductions. It provides a simplified filing service for people who meet these narrow criteria.

Form 40NR – Nonresident Return

Nonresidents who earned Alabama-source income in 2021 must file Form 40NR. This applies to individuals who lived outside Alabama but worked for a company based in the state, provided services within Alabama, or earned income tied to an Alabama business. Be sure to determine which portion of your income is taxable in Alabama and that all entries are reported.

Required Attachments and Schedules

In addition to your main form, you may need to include supporting documents:

• Schedule A is required if you itemize deductions.
  
  
• Schedule B must be included if you earned more than $1,500 in interest or dividends.
  
  
• Schedule DS is needed to claim dependent exemptions.
  
  
• Schedule CR allows you to claim a credit for taxes paid to other states.
  
  
• Schedule W-2 summarizes your wage and withholding information.

Accurately completing all required forms will help you avoid processing delays. It can also ensure you receive any funds owed to you. By planning and bringing the proper paperwork with you when you need to pay extra taxes, you can avoid confusion and possible fines.

Step-by-Step Instructions: How to File Your Alabama Tax Return 2021

Filing your 2021 Alabama return may initially feel overwhelming, but breaking it down into manageable steps can make the process easier. This guide ensures your return is complete, accurate, and submitted correctly.

Step 1 – Gather the Documents You Need to Prepare Your Return

Start by collecting all the documents needed to file your return. These include:

• All W-2 forms from your employers
  
  
• Any 1099 forms for income from freelance work, interest, or dividends
  
  
• A copy of your federal return, which is necessary for calculating deductions and exemptions
  
  
• Records of deductible expenses (if you plan to itemize)
  
  
• A copy of your prior year’s Alabama return, if available
  
  
• Social Security numbers for you, your spouse, and any dependents

Having these documents ready ensures a smoother completion of your return.

Step 2 – Choose the Correct Filing Status

Alabama uses the same filing status categories as the IRS. Choose the one that matches your federal return:

• Single
  
  
• Married Filing Jointly
  
  
• Married Filing Separately
  
  
• Head of Family (similar to Head of Household federally)

Filing status affects your exemption amount and tax rate, so selecting the correct one is essential.

Step 3 – Calculate Your Exemptions and Deductions

You can claim a personal exemption based on your filing status:

• $1,500 for Single or Married Filing Separately
  
  
• $3,000 for Married Filing Jointly or Head of Family

You may also claim $300 per dependent. Use Schedule DS to document dependents, and ensure the total number matches what you listed on your federal return.

Next, determine whether to take the standard deduction or itemize using Schedule A. Alabama allows a deduction of 20% of your adjusted gross income, up to $2,000 for single filers and $4,000 for joint filers. Be sure to apply the method that results in the lower tax liability.

Step 4 – Fill Out Your Alabama Return

Fill in your information using the correct form (Form 40, 40A, or 40NR). Include all required schedules and documentation. Double-check your math and review all personal information for accuracy. If you claim a refund, verify that your bank account details are correct to prevent delays.

Step 5 – Sign, Save, and Prepare for Submission

Before filing, both you and your spouse (if applicable) must sign the return. Keep a copy for your records, especially if you e-file. When mailing a paper return, include all necessary documents and send them to the appropriate Alabama Department of Revenue address according to your circumstances.

Taking the time to follow these steps will help you file an accurate and complete return—and ensure you receive any refund you’re owed without unnecessary delays.

How to File Your Alabama Tax Return: E-File and Mail Options

Once your return is complete, you must decide how to submit it. Alabama offers two options: e-filing through an official online portal or mailing a paper return. Each method has benefits, depending on how you prefer to file and whether you expect a payment or a refund.

E-File Your Return Using the My Alabama Taxes System

The Alabama Department of Revenue offers free online filing through the My Alabama Taxes (MAT) portal. This system is open to most individual taxpayers and is the state’s recommended method. If you’re eligible to file electronically, you can submit your return directly to the state and receive a confirmation immediately.

To begin, visit the official MAT site at myalabamataxes.alabama.gov. You’ll be guided through a secure process where you can upload your forms, enter your details, and select whether you want a refund or need to pay. Refunds from e-filed returns typically arrive within two to three weeks.

Some companies may offer electronic filing software as a service, though many charge a fee. Always review the terms before proceeding with a third-party provider. If you want to avoid added charges, stick with the MAT portal that the state provides.

Mailing a Paper Return to the Department of Revenue

If you prefer paper filing or don’t qualify for e-filing, you can mail your return instead. Be sure to send it to the correct address based on your situation:

• Use the refund address if you expect to receive a refund or owe no tax.
  
  
• If you have a payment due, include Form 40V (the voucher) and send it to the payment processing address.

Always use certified mail and keep a copy of your return for your records. Paper returns may take six to eight weeks to process, and mailing errors are one of the most common causes of delayed refunds.

How to Make a Payment or Claim a Refund

Depending on your 2021 tax situation, you may need to submit a payment or claim a refund. Here’s what to do in each case:

• If you owe taxes, you must submit your payment by April 15, 2021, even if you filed under an extension. You can make payments online through the My Alabama Taxes portal using a bank transfer or card.
  
  
• If mailing a payment, include Form 40V with your check or money order and send it to the appropriate Department of Revenue address. Be sure to allow time for processing.
  
  
• If you are due a refund, the fastest way to receive it is to e-file and request direct deposit. Most e-filed refunds are processed within two to three weeks.
  
  
• To check the status of your refund, use the “Where’s My Refund?” tool at revenue.alabama.gov. To avoid delays, make sure your return is accurate and complete.

Filing early and correctly helps avoid penalties and speeds up refund delivery.

Common Filing Mistakes to Avoid

Filing your 2021 Alabama tax return accurately is as important as filing on time. Even minor errors can result in delays, notices from the Department of Revenue, or missed refunds. Avoid these common mistakes to ensure smooth processing:

• Using the wrong deduction for federal taxes can lead to issues: Alabama permits a deduction only for taxes paid, not federal tax withheld. Double-check your federal return and report the correct amount.
  
  
• Forgetting to attach required forms and schedules: Missing items like Schedule W-2, DS, or A may delay your return. Attach everything relevant to your income and deductions.
  
  
• Selecting the incorrect filing status: Your Alabama filing status should match the one used on your federal return. An incorrect status may affect exemptions or tax owed.
  
  
• Mailing to the wrong address: If you’re filing a paper return, use the correct mailing address based on whether you owe taxes or expect a refund. You can confirm the address at revenue.alabama.gov.
  
  
• Failing to sign the return: An unsigned return is considered incomplete. If you are filing jointly, both spouses must sign the return.
  
  
• Skipping payment details: If you owe taxes, include payment or submit Form 40V. Failure to do so may result in interest and penalties.

Reviewing your return carefully before submitting it can help avoid processing delays, additional correspondence, or lost funds.

What to Do If You Missed the Deadline or Need to Amend Your Federal Return or Alabama Filing

If you missed the April 15, 2021, deadline to file your Alabama return, you still have options. Alabama provides an automatic six-month extension to file, giving you until October 15, 2021. However, this extension applies only to filing, not to payment. Any taxes owed were still due in April to avoid penalties and interest.

If you discover a mistake after submitting your original return, either on your Alabama filing or your federal return, you can correct it by filing Form 40X, the Alabama amended return form. You must file within three years of the original due date to claim a refund based on the correction.

Be sure to include any supporting documents and explain the reason for the amendment. Use the same filing method you used for your original return (e-file or mail) and always keep copies for your records. Making timely corrections and submitting unpaid taxes can help avoid interest charges and protect your refund eligibility.

Frequently Asked Questions (FAQs)

What is the deadline to file my 2021 Alabama tax return?

The original deadline to file your 2021 Alabama tax return was April 15, 2021. Alabama automatically extends the filing deadline to October 15, 2021, but this extension only applies to filing—not payment. If you owed taxes, that payment was due by April 15 to avoid penalties and interest. Filing late without payment may result in a balance owing with added fees.

Can I file my 2021 Alabama taxes electronically for free?

Yes, the My Alabama Taxes portal offers free e-filing for most individual taxpayers. This secure online system allows you to upload documents, enter return information, and receive immediate confirmation. Using MAT avoids paper delays and helps reduce filing errors. If you use paid tax services, check first to avoid unnecessary charges. Visit revenue.alabama.gov for portal access and eligibility guidelines.

Do I still need to file if I worked in Alabama temporarily?

Yes. If you earned income from an Alabama source in 2021, you must file a return even if you are a nonresident. This includes temporary or remote work done for an Alabama-based employer or client. You’ll need to file Form 40NR and report only the income tied to Alabama. Failing to file may result in notices or delayed refunds.

Can I deduct federal taxes paid on my Alabama return?

Alabama allows you to deduct federal income taxes paid, not taxes withheld. This is a key difference that many filers overlook. To determine the correct amount, use the total from your federal return, not the amount shown on your W-2. The Department of Revenue may delay or reject your state return if you deduct the incorrect amount.

Where do I send my Alabama tax return by mail?

Your mailing address depends on your situation. Use the refund address if you’re due a refund or owe nothing. If taxes are due, include Form 40V and send your return to the payment address. Alabama provides specific addresses for different cases. Always check the official Department of Revenue website before mailing your return to confirm the correct one.

How do I amend my 2021 Alabama return if I made a mistake?

To correct your return, file Form 40X and include supporting documentation that explains the change. This form is used to amend original returns and must be filed within three years of the original due date. Common reasons include corrected income, missed deductions, or filing status errors. Keep a copy of the amended return for your records after submission.

What documents should I keep after I file?

Keep a copy of your full Alabama return, all W-2 and 1099 forms, and any attached schedules for at least three years. You can use these records for audits, return amendments, or loan applications. You can also reference them for future filings. Always check when the page or guidance was last reviewed or updated on the state’s official site.