With the tax filing season already underway, experts warn taxpayers to prepare for another year of delays and complications – underscoring the importance of submitting your information early and carefully.
The Internal Revenue Service (IRS) began accepting tax returns for 2021 on January 24, more than two weeks earlier than the beginning of last year’s filing date. Most taxpayers have until April 18 to report, but the agency has a long way to go. Coronavirus stimulus checks and scaled-up child tax deductions create extra work for IRS officials at the same time as widespread staff shortages and a backlog of untreated paper returns amounting to millions.
“In many areas, we are unable to provide the amount of service and enforcement that our taxpayers and tax system deserve and need,” IRS Commissioner Chuck Rettig said in a statement. “This is frustrating for taxpayers, for IRS employees and for me.”
Here is everything you should know about preparing your return, submitting your tax and getting your refund as soon as possible.
What you need to know about the 2022 tax application season
Even in 2022, the unprecedented nature of this year’s tax application season all comes down to the COVID pandemic. The federal government ordered the IRS to provide most of the direct assistance approved for 2021 in President Joe Biden’s U.S. rescue plan, whether it was the child tax deduction or stimulus checks.
“We urge extra attention to those who received a financial impact payment or an advance on child tax deduction last year,” Rettig said. “People should make sure they report the correct amount on their tax return to avoid delays.”
These features can cause delays because they leave more room for error – either because the IRS did not calculate Americans’ stimulus totals correctly, or because taxpayers made a mathematical error.
“Taxpayers are not filing their tax returns as usual this year,” said Garrett Watson, a senior policy analyst at the Tax Foundation. “There will be big variations in people’s experiences during this year’s tax season – some will see disruption.”
When a tax return does not comply with IRS records, it is placed in the agency’s paperwork backlog, a log that has been increasingly difficult to work through amid employment and training challenges.
This means that taxpayers are likely to encounter delays if they make a mistake when filing – or even if they file an error-free paper return. Taxpayers who also wait until the last minute risk accumulating a significant waiting time, experts say.
“Getting started early and filing electronically are the two most important things,” Watson says. “What we’re seeing right now is that the backlog is primarily on the paper side. For people who want to file their return or need to file corrections and are involved in that paper process are much more likely to deal with delays this year.”
Your first step should be to calculate how much in tax you withheld during the year, as well as how much in credit you are expected to receive. This can help give you an idea of your tax refund, as well as any taxes you may end up owing – and you may also discover errors early before applying.
Child tax deduction
If you are a household in the United States with dependent children, you need to be careful when submitting your tax return this season because it is your most important option to reconcile any missing child tax deductions – or settle any overpaid balances from the entire year.
Keep an eye on “Letter 6419” from the IRS, which should indicate how much money you have already received through the program.
The maximum credit a household can receive for each child under the age of 5 was a total of $ 3,600, while the maximum payment for U.S. families with children between the ages of 6 and 17 reached $ 3,000. Before, the credit was $ 2,000 for all relatives.
Unless they have opted out, most households have probably received half of the credit to which they are entitled via six monthly prepayments. This means that they can expect to receive their remaining balance of up to $ 1,800 or $ 1,500 on their 2021 tax return, which means the credit will be slightly less than what they are used to.
On the other hand, taxpayers who have opted out of prepayments will be able to claim the full credit on their 2021 tax return – a significant return compared to the original $ 2,000 amount.
Low-income Americans can also expect to receive a larger child tax deduction than they are used to because the credit was repaid in full by 2021. American families who adopted a child or had a baby in 2021 will be able to claim any child tax credit money. which the IRS has not yet sent them.
But unlike stimulus checks, the IRS will require taxpayers to reconcile any overpayments. This means that if your income situation improved in 2021, or if you claimed fewer relatives last year than the IRS knew about, you will have to repay the overpaid child tax deduction.
In most cases, you will not be hit by a bill because the IRS can settle your balance by dipping into your refund.
To be eligible for the full first $ 2,000 of credit, the adjusted gross income (AGI) for married couples applying jointly must not have exceeded $ 400,000, while the AGI for single applicants, heads of households and all other application statuses must be less than $ 200,000. To be eligible for the remaining $ 1,000 or $ 1,500, single file earnings cannot exceed $ 75,000, household income cannot exceed $ 112,500, and married couples cannot earn more than $ 150,000. Then the credit drops by $ 50 for every $ 1,000 above the income limit.
Third coronavirus stimulation check
Millions of Americans in 2021 were eligible for a third stimulus check worth up to $ 1,400 per month. each qualifying person in their household. If you have not yet received it or are missing the full amount to which you are entitled, you will be able to claim 2021 Recovery Discount Credit.
Start by calculating how much you are entitled to receive based on your household income and number of dependents. Single files were eligible for the full credit of $ 1,400 as long as their AGI did not exceed $ 75,000, while married files could not earn more than $ 150,000 and household heads should earn less than $ 112,500. Relatives were also entitled to a payment of $ 1,400. Then keep an eye on “Letter 6475” from the IRS, which should indicate how much you have already received.
Maybe the IRS did not know you were adopting a child or having a baby in 2021; perhaps your income situation has declined. All of these circumstances could be combined to make you eligible for additional stimulus money.
Unlike child tax deductions, the IRS does not expect taxpayers to repay overpaid money. However, the IRS will not automatically calculate the 2021 recovery rebate credit for you, which means it is up to you to make sure you leave no money behind.
Experts say Americans can change a filed tax return if they realize they forgot to demand a non-stimulus payment afterwards – though that could lead to longer waits.
“It can take longer to get the amount you owe,” Watson says. “The IRS is not super aggressive in correcting returns where they owe you money, though they will come after you if you owe them money. This is where it will land on people to get their money back.”
Nearly 24 million Americans in 2021 applied for unemployment benefits, nearly 15 percent of the workforce. State unemployment agencies also paid $ 300 extra each week until September. All of that counts as taxable income for 2021, unlike the year before, when the first $ 10,400 of those payments were tax-free.
This means that all benefits you received last year are subject to full taxation. Most people automatically end up withholding tax on their checks, Watson says, but forgetting it can increase your tax bill.
When can you expect your refund – and how do you get it quickly
If you file your tax return electronically and without error, taxpayers should expect to see their refund within 21 days of filing, as long as they opt for direct payment. However, the exact timeline depends on how you file and how you want your refund paid. Here’s an estimate of what to expect:
–One to three weeks, for those who e-file with direct deposit;
– Three weeks, for those who file with direct deposit; and
–Six to eight weeks, for those who e-file or paper file with a refund check by mail.
Important to note, the IRS cannot legally issue child tax deductions or tax deductions before mid-February – a legal requirement designed to prevent the agency from making fraudulent refunds.
Last year, the average tax refund topped $ 2,800, the agency said.
2022 tax season calendar: Key dates and deadlines to remember
April 18: Deadline for submitting your 2021 tax return or requesting a six-month extension, even though you still have to pay taxes you owe to avoid fines or fees.
October 17: Deadline for submitting your 2021 tax return if you requested a six-month extension.
–Check with your state’s tax authority to determine when your state taxes should be paid.
Tax return checklist: Key documents you may need to collect
Form W-2 provided by your employer. This form shows how much you were paid in 2021, as well as how much in tax you withheld.
–Blank 1098, which shows how much you have paid in interest on a mortgage or student loan.
–Form 1099, which reports income that you have earned by working as a self-employed entrepreneur or from unemployment benefits. You may also receive Form 1099-INT, which reports interest income on the savings account.
– Letter 6419 is intended to help you track child tax deductions.
– Letter 6475 is intended to help you track payments with financial impact.
Bottom line: File early – but do not rush
The IRS says electronic filing of a flawless tax return is more important than ever this year, using either software, a tax professional or the agency’s Free File program – which is open to anyone earning $ 73,000 or less a year.
“Taxpayers should aim to create the least amount of obstacles for the IRS by reviewing their tax application,” said Tony Molina, CPA, product evangelist at Wealthfront. “The more complications and obstacles you create for the IRS, the greater the chance your return is delayed. You should definitely aim to file early, but not at the expense of causing even more delays through filing errors.”
Once you’ve got all your necessary documents from financial companies and your employers, consider keeping them all in one place by creating a physical or digital folder, Molina says.
Even if you earn less than what is required to file a tax return ($ 12,400 for single filers in 2021), you can leave money on the table if you choose not to file. Persons in this tax framework must submit feedback to claim missing stimulus or child tax deduction.
Work with a taxpayer to make sure you get your questions answered and avoid calling the IRS directly, as the agency says it still handles a record number of calls with limited resources.
“If you leave this to the last minute, you will probably find yourself procrastinating even longer and waiting until the last minute to file,” Molina says. “In that case, filing on April 15 will put you at the end of the IRS queue, and that’s the last place you want to be.”
(Visit Bankrate online at bankrate.com.)