Official tax season began on Monday, January 24, 2022. This was the date the Internal Revenue Service (IRS) began accepting and processing 2021 tax year returns. If you’ve already filed, congratulations! If not, you’re not alone. According to the IRS, 20-25% of all Americans wait until the last two weeks before the deadline to prepare their returns. This year, you actually have a few extra days to file because the deadline is delayed to Monday, April 18th. On April 16 the District of Columbia celebrates Emancipation Day. Since it falls on a Saturday this year, it is being observed on Friday the 15th and by law, Washington, D.C. holidays impact tax deadlines for everyone in the same way federal holidays do. But, if you live in Massachusetts or Maine, taxes this year must be filed by April 19, due to the observed holiday, Patriots’ Day, on April 18. If you got all that, your tax filing will be the easy part!
If, for some reason, you do miss the tax deadline, you can file an extension to October 15. But what you do need to understand is you still must pay any owed taxes by April 18, or you might be facing penalties and interest. If you owe and can’t pay all the taxes upfront, the IRS offers various payment plans to help you reduce penalties and interest on your taxes. There is no penalty if you don’t owe taxes; the IRS just keeps your refund for longer. Of course, it is best to meet the IRS tax deadline to avoid any issues.
Get Yourself Prepared to File
It’s important to have all the information you will need in hand to make sure you file a complete and accurate return. Having an accurate tax return can avoid processing and refund delays. The following are some changes and updates that might affect your filing this year.
- The American Rescue Plan was passed in March 2021, increasing the Child Tax Credit from $2,000 to $3,600 for any children under 6 and up to $3,000 for children between ages 6 and 17. To provide additional assistance to families during the pandemic, the IRS began distributing this credit via check or direct deposit in advanced monthly payments of $300 (under 6) and $250 (between age 6-17). The credit is based on 2020 income and phased out for those with income over $112,500 (single) and $150,000 (married filing jointly). Confirm you received the appropriate amount and provide the details with your tax filing information.
- If you received an Economic Impact Payment (American Rescue Plan stimulus payments) last year, make sure you report the correct amount on your tax return to avoid delays. If you are claiming the Earned Income Tax Credit, or the Child Tax Credit, keep in mind it will slow down your tax return due to regulations designed to deter fraud.
- As part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, your charitable contributions for 2021 can be deducted up to 100% of your adjusted gross income (AGI) for those that itemize deductions. If you take the standard deduction, you are still eligible for an above the line deduction up to $300 ($600 for married filing joint), so be sure to pass along any contribution information to your tax preparer.
- With many people filing for unemployment benefits during 2020 – 2021 for income relief, there was a partial amount provided tax free for 2020 only (up to the first $10,200), any unemployment benefit received in 2021 will be fully taxable. Check to see if any withholding was taken from your unemployment income or you may need to plan now to cover the additional taxes.
While all tax filings should be completed timely, it is important to note that the pandemic put an immense strain on the resources of the IRS and continues to create havoc. Due to a shortage of staffing and the implementation of relief packages, they are still facing a tremendous backlog of unprocessed returns from last year. The backlog of unprocessed returns and correspondence with the IRS is generating automatic notices to tax filers that may not be accurately reflecting your tax situation. If you do receive a notice, it is important to review it with your CPA or tax preparer.
If you expect to receive a refund, and would like to receive it within 2-3 weeks, the IRS has a few suggestions for you to follow to help avoid delays. First, the earlier you file the better, try not to wait until the peak of the season, which starts in late March. Then, when you are ready, file a complete and accurate return electronically and choose direct deposit for the quickest refund. To avoid delays in processing, you should avoid filing paper returns wherever possible. Below are links to some helpful resources. Happy Taxing!