The annual tax filing season will begin later this month. Maybe it’s not pretty.
A host of issues could slow things down and make it harder to prepare tax returns. Among them: The Internal Revenue Service still hasn’t worked through all of last year’s returns, Congress has added new wrinkles, and the pandemic continues to cause problems.
The National Association of Tax Professionals warns of “the most trying year yet” for preparers and predicts that many taxpayers may need additional help. Erin Collins, head of the federal watchdog Taxpayer Advocate Service, said she was “deeply concerned about the upcoming filing season,” for a variety of reasons.
The country’s tax season will officially begin on January 24, when the IRS begins accepting and processing returns. Arizona’s tax filing season will also begin on this date.
What are the highlights of tax season?
The deadline to file a 2021 return or an extension request is Monday, April 18. That’s three days longer than the normal due date of April 15 due to the Emancipation Holiday in Washington, D.C. (taxpayers who live in Maine or Massachusetts have until April 19 to file due of a holiday celebrated in those states, Patriots Day.) Taxpayers seeking an extension will have until Oct. 17 to file.
The IRS expects most taxpayers to receive refunds, as in previous years. Most should receive their refunds within 21 days of their e-deposit if they choose direct deposit (and there are no issues with their returns). Last year’s average federal reimbursement was over $2,800.
However, by law, the IRS cannot issue refunds involving the earned income tax credit or additional child tax credit until mid-February, although taxpayers can still file earlier than that.
Some people might want to file returns even though they are not required to, such as to claim a recovery rebate credit, tied to 2021 stimulus payments, or additional funds from the Child Tax Credit.
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Is the pandemic still causing delays?
Apparently yes. In a statement, IRS Commissioner Chuck Rettig said the pandemic “continues to create challenges.” It doesn’t help that call volumes at the IRS have been and continue to be heavy. Last year, the IRS received more than 145 million phone calls from Jan. 1 to May 17, more than four times the normal amount.
“In many areas, we are unable to provide the amount of service and enforcement that our taxpayers and our tax system deserve and need,” Rettig said.
The IRS is catching up and recently said that all 2020 paper and electronic individual refund returns received before April 2021 are processed if a return has no errors and does not require further review. However, many returns had errors, required additional review, did not request a refund, or were not filed as soon as possible.
As of December 23, the IRS still had 6 million unprocessed individual returns. The agency said it had to correct “a lot more” taxpayer errors than usual.
Additionally, the IRS did not finish correcting 2020 returns and processing refunds for people who paid taxes on unemployment benefits before Congress made that compensation temporarily tax-exempt, in below certain income limits.
The silver lining, if there is one, is that taxpayers generally don’t need to wait for their 2020 return to be processed to file their 2021 return.
How can taxpayers avoid delays?
Rettig urged taxpayers to file electronically and enroll in direct deposit. It became standard advice, as in previous years.
Among other suggestions, the IRS is urging people to organize and gather 2021 tax records before preparing and submitting returns. This includes social security numbers and possibly other information such as individual tax identification numbers.
In addition, taxpayers can check irs.gov for updates, including the latest information on reconciling child tax credit advance payments or applying for a recovery rebate credit for stimulus payments. missing.
Taxpayers should also start monitoring documents, including W-2 forms from employers; 1099 for dividends, unemployment benefits and others; a 1099K or 1099 MISC for free market work; a 1099-INT for bank interest or the Health Insurance Marketplace Statement known as 1095-A.
Tax forms usually start arriving in the mail or are available online from employers and financial institutions in January. If information on a form is incorrect, taxpayers should contact the issuer for a correction.
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Where can taxpayers seek help?
There are various options to help taxpayers, including many volunteer tax help and senior tax advice sites across the country, as well as the IRS Free File program.
Additionally, taxpayers can create an online account at irs.gov for faster access to information.
“We’ve invested in developing new online capabilities to make it a quick and easy way for taxpayers to get the information they need,” Rettig said.
IRS Free File opened on January 14, when participating vendors began accepting completed returns and holding them until they could be filed electronically.
Free File is open to individuals who earned $73,000 or less in 2021. The program allows taxpayers to file electronically at no cost using certain commercial software.
More information about these programs is available at irs.gov.
What are the additional complexities?
There are several, including the following:
Child tax credit advance payments. Last year, Congress increased the amount of this appropriation and, in a twist, paid half the appropriation up front. Now households that received installments must compare what they received in 2021 with what they can properly claim on their 2021 return.
The IRS sent letter 6419, containing key information such as amounts paid and the number of eligible children. Taxpayers can also verify key information using the CTC update portal on irs.gov.
Eligible taxpayers who received advance payments must file a 2021 return to obtain the second half of the credit. People who did not receive advance payments can claim the full credit by filing a return, including those who normally do not need to file a return. But taxpayers who received more than they were entitled to may have to repay the difference.
Economic Impact Payments. The government has approved three rounds of pandemic stimulus payments – two in 2020 and the third last year. At the end of January, the IRS will begin issuing letter 6475 to people who received the third payment. Eligible persons who have not received a payment can still claim it, but they will have to file a declaration to do so.
No more hassles in store
These additional payments and credits have helped millions of people overcome financial pressures, but the added complexity of filing taxes is not without criticism.
“The new complications are the result of all the gifts the federal government has given Americans to mitigate the effects of the COVID-19 pandemic,” noted Tom Giovanetti, chair of the Institute for Policy Innovation’s research group. “Many taxpayers will need to do additional calculations in order to do their taxes properly, and these additional complications increase the risk of errors.”
Giovanetti is critical of tax changes enacted under President Biden, though the first two stimulus packages were signed into law while President Trump was in office.
Other changes cited by the National Association of Tax Professionals that could complicate filing season include those related to the child and dependent credit, earned income tax credit, policy-related credits. paid sick and family leave and Paycheck Protection Program loans.
Jim Simpson, a certified public accountant who runs some of the VITA tax-free sites around Metro Phoenix, said key changes include an expanded and fully refundable child tax credit, an income tax credit wider won which is available to more people (including some without children) and a higher and now fully refundable child and dependent care tax credit.
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