As we continue to forge through 2022 and tax-filing season is already open, the IRS warns taxpayers to prepare for delays and complications.
Unlike 2021, the tax deadline has not been extended, and most taxpayers will have until April 18th to file their taxes this year (April 19th for taxpayers who live in Maine or Massachusetts). However, taxpayers should know that Coronavirus stimulus checks and increased child tax credit payments are creating extra work for IRS officials, on top of widespread staffing shortages and a seemingly endless backlog of unprocessed paper returns. That is why we recommend starting early this year.
"The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don't face processing delays," said IRS Commissioner Chuck Rettig. "Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year. And we urge extra attention to those who received an Economic Impact Payment or an advance Child Tax Credit last year."
IMPORTANT CONSIDERATIONS BEFORE FILING YOUR 2021 TAX RETURN:
- Don’t file your taxes until you have all your tax documents.
While taxpayers should not file late, they also should not file prematurely. People who file before they receive all the proper tax reporting documents risk making a mistake that may lead to processing delays. Typically, year-end forms start arriving by mail – or are available online – in January. You should’ve received your W2s, 1099 forms, and 1098 forms by January 31st, though some 1099s may not arrive until mid-March. And K1s usually arrive in March.
There is also a new tax document you may need to keep a lookout for this year. You may receive a Letter 6419, Advance Child Tax Credit Reconciliation, by the end of January. This document will help individuals reconcile and receive the full amount of their 2021 Child Tax Credit. Additionally, you may need to file a Letter 6475, 2021 Economic Impact Payment, to determine your eligibility to claim the Recovery Rebate Credit for any stimulus payments you might not have received.
If you don’t get your forms on time, contact your financial institution. Even if you can prepare your taxes without that document, it's important to be sure that the IRS has the same information that you do. Otherwise, your return could trigger red flags that could get you audited – even if it's entirely someone else's fault.
- Even if you make less than is required to file a tax return, you could be leaving money on the table if you choose not to file.
This year, the IRS recommends that individuals who are not required to file a tax return file one for 2021 to claim potentially thousands of dollars in tax credits. Such tax credits from 2021 include:
- The Recovery Rebate Credit to receive any remaining 2021 stimulus payments that they might not have received
- The remaining Child Tax Credit for which they are eligible, including any monthly payments that they might not have received
- The Earned Income Tax Credit, the federal government's largest refundable tax credit for low- to moderate-income families
- Don’t forget to maximize your savings by making any last-minute contributions to your 401(k), IRA, or HSA accounts – and maybe even your 529 plan!
If you are contributing to a 401(k), be sure to check your contributions to get the full benefit of an employer match. If you have earned income, you can contribute up to $6,000 to a traditional IRA in 2021 and you can make that contribution up to April 18, 2022. You also may be able to contribute the same amount in your spouse's name if they don't have a retirement plan through their employer. Additionally, some taxpayers may qualify for a saver's credit for making eligible contributions to their retirement plan.
If you have access to an HSA, contributions are tax-deductible and tax-deferred and can be made up until April 18, 2022. In addition, if you itemize your deductions and incurred medical or dental expenses last year, you may be able to qualify for a deduction for expenses– but only if they exceed 7.5% of your adjusted gross income.
- Tax time is the perfect time for a detailed budget review with your financial professional.
Because you’ll be reviewing your finances and spending from the past year, we often recommend a detailed financial review at this time. CONTACT US today to schedule a financial review with one of our financial advisors. We’re happy to discuss your current situation as well as any changes you’d like to make to your financial plan moving forward.
SOURCES:
https://www.bankrate.com/taxes/tax-season-2022-guide-file-taxes-get-refund/
https://salinapost.com/posts/3fd6b597-e9de-40dc-8f50-415aeca6380d
https://bestpathforward.com/reminders-as-you-prepare-your-2021-taxes/
https://thestatement.bokf.com/articles/2022/02/02/22/40/financial-check-up
https://www.fool.com/retirement/2017/02/09/when-will-i-have-all-my-tax-documents.aspx
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.