Adjusted Gross Income (AGI) is defined as gross income less income adjustments. Wages, dividends, capital gains, business income, retirement distributions, and other income are all included in your gross income.
Adjustments to income include things like education expenses, student loan interest, alimony payments, and contributions to a retirement account. Your AGI will never be greater than your Gross Total Income on your tax return, and in some cases, it may be lower.
AGI is the amount of income that the IRS considers taxable in any given year. Your AGI from 2021 is important for calculating your potential tax refund, but your AGI from 2020 is required in order to file your 2021 tax return electronically at all.
Your prior year AGI is used by the IRS to verify your identity and allow you to e-file your return. If the information you provided does not match what the IRS has on file for you, your return will be rejected. If your return is rejected, you can resubmit it with the correct AGI.
Don't worry if you don't have last year's tax return. Despite the fact that the IRS recommends keeping your tax returns for three years, you can find that information on the IRS website by creating an online IRS account.
The most obvious reason to open an IRS account is to access your personal tax information quickly. Once you've registered, you'll have access to a wealth of tax information.
You can use an IRS online account to make payments, go paperless for certain IRS notices, and approve authorization requests from your tax professional, in addition to viewing your personal tax information.
You can obtain instant copies of tax documents such as transcripts of previous tax returns and wage and income statements. With an online account, you can also request an Identity Protection PIN to add an extra layer of security to your tax records.
If you didn't file taxes last year, the IRS won't be able to use your AGI to verify your identity. If you used the IRS' nonfiler tool to claim child tax credits or stimulus payments, you'll need to include an AGI on your 2021 tax return.
According to the Washington Post, several taxpayers are having their tax returns rejected this year due to incorrect 2020 AGIs.
The backlog of unprocessed tax returns at the IRS is the major issue. Some 2020 tax returns have yet to be processed, and in many cases, the IRS does not have the taxpayer's AGI from the previous year to match with this year's return. The IRS advises taxpayers to enter $0 for last year's AGI if their prior year's tax returns have not yet been processed.
If your tax return from 2020 hasn't been processed yet, the IRS recommends entering $0 for your AGI on your 2021 tax return.
