Beginning on January 23rd, the official tax filing season for 2022 may surprise some taxpayers. Checking to see if you will owe the IRS extra money or if you will get a refund and how much is a good idea right now. This is owing to the possibility that the amounts may differ from those from the previous year due to altered tax incentives and altered financial conditions. It’s also crucial to keep in mind that a number of well-known tax advantages have ended, which might mean that some taxpayers will receive lesser refunds. These include modifications to the Earned Income Tax Credit, Child Tax Credit, Child and Dependent Care Credit, and Charitable Deductions. Even if you owe the IRS more money, you can still submit as long as you schedule your payment for April 18th to avoid penalties and interest.
The tax code has undergone additional revisions that could have an impact on your return. For instance, the COVID-related tax relief provisions that were in place for the 2020 tax year have expired, while the employee retention benefit for some businesses was extended under the American Rescue Plan Act of 2021. You should be aware of these modifications and how your taxes may be affected if you are self-employed or run a small business.
It’s also crucial to keep in mind that the COVID-19 outbreak has caused the IRS to experience delays and personnel shortages, which means it can take longer than usual for your return to be processed or for any concerns to be resolved.
In conclusion, the formal 2022 tax filing season has begun, and modifications may have an impact on your return. It’s crucial to understand these modifications and how they can affect your taxes. Even if you can’t pay the whole amount due, it’s still crucial to file your return by the deadline to avoid penalties and interest. It is essential to seek advice from a tax expert or the IRS if you have any questions or concerns regarding your taxes.
Another significant development is the IRS’s announcement that, rather than the customary 90%, it will waive the underpayment penalty for taxpayers who paid at least 85% of their entire tax liability for the year. Taxpayers do not need to submit any additional paperwork or make a waiver request because this relief is automatic. This is done in acknowledgement of the financial hardships the pandemic has caused for many taxpayers.
Additionally, it’s critical to be watchful in defending oneself against tax-related fraud. The IRS has issued a warning about an uptick in phishing schemes and other sorts of fraud that aim to steal the financial and personal information of taxpayers. Be vigilant of unauthorized calls, emails, or texts purporting to come from the IRS or another organization dealing with taxes. By phone, email, or text message, the IRS will never contact a taxpayer to request personal or financial information. If you get a notification like that, ignore it and report it to the IRS.
In general, it’s critical to be knowledgeable about tax code changes and how they could influence your return. To avoid penalties, make sure to submit your taxes on time and pay as much of your tax debt as you can. Consult with a tax expert or the IRS if you have any questions or concerns.
A crucial factor to take into account is how the epidemic may affect your tax return. Due to the pandemic, a large number of taxpayers have experienced job loss, decreased income, or other financial hardships. To lessen the stress on taxpayers at this time, the IRS has implemented certain changes.
For the 2020 tax year, the IRS, for instance, extended the deadline for contributions to certain retirement plans to July 15, 2021. This covers donations to IRAs (both standard and Roth), as well as other retirement plans.
Additionally, the IRS has altered the regulations governing “coronavirus-related distributions” (CRDs) and “coronavirus-related loans,” which are withdrawals from retirement plans that must be repaid (CRLs). Instead of reporting the entire amount of income tax payable in the year of the distribution, taxpayers who have taken a CRD have the option to stretch it out over three years.
It’s also crucial to remember that if you received unemployment benefits during the year, you must declare them as income on your tax return since they are taxable. For taxpayers with an adjusted gross income of less than $150,000, the American Rescue Plan Act of 2021 exempts the first $10,200 of unemployment benefits from federal income tax.
Furthermore, the IRS has offered relief for taxpayers under certain circumstances if you were affected by the epidemic and were unable to pay your taxes on time. Payment plans may be offered for taxpayers who owe taxes but are unable to pay them in full. Taxpayers may be eligible for relief from penalties for failing to file and pay taxes on time.
The IRS has granted relief as a result of the pandemic, so it’s crucial to be aware of these modifications to the tax rules and how they can effect your return. If you have any questions or concerns, speak with a tax expert or the IRS. Also, complete your return on time, even if you can’t pay the entire amount due, to avoid penalties and interest.
The American Rescue Plan Act of 2021 and the Coronavirus Aid, Relief, and Economic Security (CARES) Act both granted authorization for the stimulus payouts, commonly known as “recovery rebates.”
You do not need to record the stimulus funds on your tax return because they are not regarded as taxable income. However, you might be able to claim the Recovery Rebate Credit on your tax return if you did not get the entire amount of the payment for which you were qualified.
Since the Recovery Rebate Credit is refundable, you can still be qualified for a refund even if you don’t owe any taxes. The credit is determined by the total amount of stimulus payments received as well as the taxpayer’s eligibility, which can be determined by factors like the number of children who qualify or the taxpayer’s adjusted gross income.
It’s also crucial to remember that you must return any stimulus payments you received if you weren’t eligible for them. Returning the payment to the United States will accomplish this. Treasury or by indicating the payment on your tax return as an overpayment.
Additionally, you must notify the IRS if your circumstances have changed after you got a stimulus payment, such as a change in income, a change in marital status, or an increase in the number of dependents. You can accomplish this by submitting a corrected return or by using the IRS website’s Non-Filers service.
To sum up, it’s critical to understand how the stimulus funds will affect your tax return and to claim the Recovery Rebate Credit if you qualify. You must return any stimulus payments you received if you are not qualified. Make sure to notify the IRS of any changes to your situation. If you have any questions or concerns, speak to a tax expert or the IRS.
In order to avoid penalties and interest, it’s crucial to remember to file your tax return by the deadline, even if you can’t pay the whole amount due. Take advantage of the assistance that the IRS has provided in response to the pandemic. Additionally, the IRS provides free tax preparation services for qualified taxpayers if you need help submitting your return. Finally, if the epidemic is causing you financial difficulty, you might be qualified for an installment plan or other payment choices.
