By Richard Rubin
Jan. 24, 2022
WASHINGTON—It’s that time again. Tax-filing season is here, and the pandemic and its aftereffects are still causing complications. Here’s a guide to what you should expect as you prepare and file your returns.
When does tax season start?
The Internal Revenue Service will begin accepting 2021 individual income-tax returns on Jan. 24. Most taxpayers get refunds. Early filers tend to be lower-income households whose primary earnings come from their jobs. They are often trying to get that refund quickly and aren’t waiting on information from partnerships and investments, which are of greater importance to the wealthier investors who tend to file later.
When does tax season end?
The tax deadline returns to its traditional mid-April slot after being delayed the past two years, but it isn’t April 15. This year, it has been postponed nationwide until April 18 because of the local Emancipation Day holiday in Washington, D.C. Residents of Maine and Massachusetts can wait until April 19 because of the Patriots’ Day holiday.
Can I get an extension?
Yes. You can seek a six-month extension for your filing. That doesn’t change the payment due date, however, and failing to pay enough by mid-April can trigger interest and penalties.
Is there anything unusual this year?
Yes. 2021 was unusual because of the pandemic, and that means an unusual echo into tax filing. Among the significant issues are the child-tax-credit and economic-stimulus payments. The IRS is still struggling with backlogs from closing its offices and administering new pandemic-era programs. Those stresses hamper the agency’s ability to respond to taxpayers.
What’s the deal with the child tax credit?
Many taxpayers received part of their 2021 child tax credits in advance, in monthly installments from July through December. The IRS is sending letters to taxpayers showing how much money people were sent in advance. Those amounts must be subtracted from the total credits claimed on the tax return.
If you have a 10-year-old child and you’re a married couple with $125,000 in income, you are eligible for a $3,000 child tax credit, up from $2,000 in 2020. But you likely got $1,500 already in advance payments; that must be accounted for on your tax return. Your refund will depend on the rest of the return and what paycheck withholding you had during the year.
If you had a baby during 2021, you might not have gotten any advance child tax credit payments and can claim up to $3,600 on the tax return.
Taxpayers who got too much money in advance—for a child they don’t ultimately claim on their returns—might need to repay it. But that repayment requirement is limited or waived for lower-income households.
What about economic-stimulus payments?
Most people received $1,400-per-person payments shortly after Congress approved them in March 2021, based on information from the 2019 or 2020 returns the IRS had at the time. Subsequently, if people qualified for more money based on 2020 returns they filed later, the IRS sent them more.
These payments were separate from the two payments in 2020, which are addressed on 2020 tax returns, not on the 2021 return. As with the child tax credit, the IRS is sending letters that include the government’s records of payments it sent.
The stimulus payments were based on prior years’ tax returns, so people whose income declined in 2021 into the eligible-income range can get money beyond any payments they received in March.
The payments start shrinking once income reaches $75,000 for individuals and $150,000 for married couples. For example, an individual who made $120,000 in 2019 and 2020 but $70,000 in 2021 likely didn’t get a payment in March but can claim $1,400 on the 2021 tax return as the Recovery Rebate Credit. People who had babies in 2021 and didn’t get the money in March can also claim the payments through their tax returns.
People who got money based on their prior years’ returns but made more than the thresholds in 2021 don’t need to repay the stimulus payments. They also are not taxable income.
How fast should I expect my refund?
The IRS says electronically filed tax returns without discrepancies or errors can yield refunds within 21 days.
What can speed my refund?
Electronic filing and direct deposit make return processing go faster. Taxpayers should also pay attention to letters they get about stimulus payments and child tax credits. If the return and those documents match, the refund will move faster. Discrepancies may take a while to resolve.
What can slow my refund?
Anything that requires paper or human attention—such as a paper return, or a request for a paper check—will slow your return. As of Dec. 31, the IRS still had six million unprocessed 2020 tax returns and as of Jan. 8, it had 2.3 million unprocessed amended tax returns. There are also backlogs of employment tax returns and other correspondence. The agency said in January that its processing of supplementary forms and documents was taking at least 60 days.
What if I need to talk to someone at the IRS?
It won’t be easy. According to the National Taxpayer Advocate, an in-house IRS critic, the agency received a record 282 million telephone calls in fiscal 2021, and just 11% were answered by a person. That is down from 35% three years before. The IRS encourages people to use the detailed resources available on its website for general questions and to set up an online IRS account for queries that can be addressed that way. The IRS also has a mobile app, a YouTube channel and social-media accounts that provide information.
Are there free options for tax filing?
The IRS hosts the Free File program, which provides tax preparation for people with incomes under $73,000. The largest tax-preparation companies—Intuit Inc.’s TurboTax and H&R Block Inc.—no longer participate in that program. There are also free tax-preparation clinics at sites around the country that are sponsored by the IRS. The IRS also has free electronic fillable forms for taxpayers in all income groups.
Beyond the child-tax-credit and stimulus payments, are there other new provisions to be aware of?
The tax credit for child and dependent care is larger than in past years. Just for 2021, it is worth up to 50% of child-care costs up to $8,000 for one child and $16,000 for two or more children. Additionally, the credit is refundable for 2021, which means people can get it even if they don’t otherwise owe income taxes.
Can Congress still change the 2021 tax law?
Yes. Democrats are considering allowing a larger deduction for state and local taxes in 2021 than the $10,000 cap now in the law. That proposal is tied up in the stalled Build Back Better legislation. The longer that is delayed, the less likely it is to be retroactive to 2021, but affected taxpayers might consider waiting to file their returns.
What if the IRS hasn’t processed my 2020 tax return?
You can still file a 2021 return even if the IRS hasn’t processed the 2020 return, even though electronic filing typically requires the prior year’s adjusted gross income. The IRS says that people waiting for that processing can enter $0 as their 2020 adjusted gross income when they file electronically.
Write to Richard Rubin at firstname.lastname@example.org
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