Tax Return Rejections: How to Be Sure to Enter Your Correct AGI
To e-file your taxes, you'll need to match last year's AGI. But what if your 2020 tax return hasn't been processed yet?
The IRS uses your AGI from the prior year to confirm your identity when you e-file.
The tax term AGI, or adjusted gross income, represents the amount of income that the IRS considers taxable for any given year. Your AGI from 2021 is important for determining your potential tax refund, but your AGI from 2020 is absolutely necessary in order to electronically file your 2021 tax return at all.
The IRS uses your AGI from the year prior as a method identity verification. If there's a discrepancy between your 2021 tax return and your 2020 AGI as recorded by the IRS, your tax return won't be accepted. The Washington Post reported Wednesday that several taxpayers are seeing tax returns rejected this year due to incorrect 2020 AGIs.
The big problem stems from the IRS backlog of unprocessed tax returns. Some 2020 tax returns haven't been processed yet, and in many cases, the IRS doesn't have a taxpayer's last year's AGI to match with this year's return. The IRS advises tax filers whose prior year's tax returns are still unprocessed to enter $0 for last year's AGI.
Read on to learn more about how to enter your AGI on your 2021 electronic tax return, regardless of your filing or tax return status for 2020.
For more, discover the best tax software for 2022, the biggest tax deductions for this season and the most important tax changes to watch out for this year.
What is AGI, and how is it determined?
Your total gross income includes all of your wages, salaries, dividends, interest, gambling winnings, retirement distributions, unemployment benefits -- all of the money you bring in.
Your adjusted gross income equals all of that money minus income adjustments such as alimony, student loan interest payments and health savings account contributions. These income adjustments are not the tax deductions that determine your overall tax burden; they are deductions to your income that set the standard level at which you can be taxed.
If you have adjustments to your gross income, you will record them in Part II of IRS Form 1040 Schedule 1. The IRS offers a thorough lesson on these adjustments to income here (PDF).
How can I find my AGI if I don't have last year's tax return?
If you have your tax return from 2020, you can find your AGI from that year on Line 11 of your 1040 form.
If you don't have last year's tax return, don't worry. Even though the IRS recommends keeping your tax returns for three years, you can also find that information on the IRS site using an online IRS account.
Creating an online account at the IRS website requires registering with ID.me, an identity verification service that has attracted attention lately for its facial recognition requirement via "video selfie." To address privacy concerns, ID.me recently introduced the ability to skip the video selfie, but you will still need to provide your driver's license and other personal information to create an ID.me account that is authorized for the IRS.
After you've created an account and logged into your IRS account, click View Tax Records and then the big blue button marked Get Transcript. On the next page, select Adjusted Gross Income from the drop-down list of reasons for needing a transcript, leave the Customer File Number box blank and hit Go.
On the resulting page, select 2020 under Return Transcript, which will spawn a PDF file showing a breakdown of your 2020 tax return. Scroll down to the bottom of the Adjustments to Income section to find your adjusted gross income for 2020.
If you don't want to use an online IRS account, you can also request a tax transcript by mail or by calling the IRS automated phone transcript service at 800-908-9946.
What if my 2020 tax return hasn't been processed yet?
Last year was an unprecedented tax season for the IRS -- pandemic-related tax changes and staffing issues created a huge workload that the service is still churning through. In its March 25 operations update, the IRS estimated that it still has 7.2 million unprocessed tax returns.
If your tax return from 2020 has not yet been processed, the IRS says to enter $0 for your AGI on your 2021 tax return.
What if I didn't file taxes in 2021?
If you didn't file taxes last year, there's nothing for the IRS to verify your AGI against to check your identity. However, if you did claim child tax credit payments or stimulus payments using the IRS' nonfiler tool, you will need to include an AGI in your 2021 tax return.
The IRS says that if you used the nonfiler tool to claim federal payments in 2021 but didn't file a 2020 tax return, you should enter $1 for your AGI on your 2021 tax return.