Tax Season is Here

The IRS started accepting individual tax returns for 2021 this past Monday. Below are some important things to keep in mind while navigating through another filing season. Whether you file through software like Turbo Tax, utilize a small firm like H&R Block, or employ a Tax Professional or Accountant such as myself, these reminders and tips will ensure you get through the filing season as smoothly as possible (which, let's face it, is hard enough as it is).

Deadline

This year's deadline to file is Monday, April 18th, 2022. Need more time? You'll be granted an automatic extension to Monday, October 17, 2022 by filing form 4868. It is important to keep in mind that an extension to file is NOT an extension to pay; if you owe tax for 2021, payment is due April 18th.

Don't forget your state tax return! Most states follow the federal due date, but make sure to confirm if you're unsure about your state.

Mistakes to Avoid

While the IRS is now accepting returns, there are circumstances where waiting can be better. I always advise my clients to make sure to have all documentation (W-2s, 1099s, IRS letters. etc.) before filing. This is true even if you feel you could get by without this data; do not use guesses or estimates when it comes to your return. Inaccuracies on your return can lead to extensive delays, especially during this time of a pandemic, IRS staff shortage and continuous tax law changes. Other mistakes, such as unsigned forms or leaving something off, can also bring potential delays.

Speaking of delays, Uncle Sam will hope you have some patience during this particular tax season. As you may have heard, the IRS is among the many experiencing staff shortage this year. Furthermore, there are many returns from 2020 that are in the IRS backlog. If you are one of the taxpayers with a 2020 return still in process, go ahead and file your 2021 return. Run into an issue this season? The IRS advises taxpayers to utilize the various resources on its website, rather than calling, to ensure timely resolution. Though promising, many of these site resources are still in initial stages and taxpayers are already reporting issues with them. This is where it may be handy to seek help from a Tax Professional who can help you resolve issues and obtain answers.

Record-Keeping!

Another thing I am constantly telling my clients is save all tax documents. Rule of thumb is to save 7 years worth of records/documentation, though, I advise my clients to save at least 3 years of documentation (tax returns, w-2s, financial info relevant to returns, etc). Don't merely rely on third-party tax software (in case of tech issues, for example), or your tax preparer (you may decide to switch preparers or may need records immediately for something, so it's wise to keep on-hand). Taxpayers are realizing this even more so this year as the IRS emphasizes saving letters received in the mail of economic payment and child tax credit payment amounts. These amounts will need to be reconciled on your tax return and if the amounts are wrong, expect delays (remember the point above)? Ask your Tax Professional for a tax organizer or advice on best record-keeping practices.

Final Tips and Reminders

It is best to file your tax return electronically and, if receiving a tax refund, elect direct deposit to ensure your return is processed as quickly as possible. By filing this way, IRS says you can expect your refund within 21 days. So far this year, I've seen taxpayers receive theirs faster than that, within 14 days of filing. If, however, you claim Earned Income Tax Credit (EITC) or Advanced Child Tax Credits (ACTC), the IRS is required to hold your refund until February 15th. This provides more time for review.

Expecting to owe taxes rather than get a refund? You can easily pay online. If you have a large balance and having trouble paying, it is fairly easy to request a payment arrangement right online. In your account, you can view your entire balance, in addition to other helpful resources such as viewing your tax record and data for prior years.

Wishing you a smooth tax season! - Deborah