With tax-filing season already underway, experts are warning taxpayers to brace for another year of delays and complications — underscoring the importance of filing early and preparing your information carefully.
The Internal Revenue Service started accepting 2021 tax returns on Jan. 24, more than two weeks earlier than the start of last year’s filing date. Most taxpayers have until April 18 to file, but the agency has a long road ahead of it. Coronavirus stimulus checks and scaled-up child tax credit payments are creating extra work for IRS officials at the same time as widespread staffing shortages and a backlog of unprocessed paper returns stretching into the millions.
“In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs,” according to IRS Commissioner Chuck Rettig in a statement. “This is frustrating for taxpayers, for IRS employees and for me.”
Here’s everything you should know about preparing your return, filing your taxes and getting your refund as quickly as possible.
What to know about the 2022 tax-filing season
Even in 2022, the unprecedented nature of this year’s tax-filing season all comes down to the COVID pandemic. The federal government tasked the IRS with delivering most of the direct aid approved for 2021 in President Joe Biden’s American Rescue Plan, whether that was the child tax credit or stimulus checks.
“We urge extra attention to those who received an Economic Impact Payment or an advance Child Tax Credit last year,” Rettig said. “People should make sure they report the correct amount on their tax return to avoid delays.”
Those features can cause delays because they leave more room for error — either because the IRS didn’t tally Americans’ stimulus totals correctly or because taxpayers made a math error.
“Taxpayers are not submitting their tax returns as normal this year,” says Garrett Watson, senior policy analyst at the Tax Foundation. “There’s going to be wide variations in peoples’ experiences during this year’s tax season — some are going to see disruptions.”
When a tax return doesn’t match up with IRS records, it’s placed in the agency’s paper processing backlog, a logjam that’s been increasingly harder to work through amid hiring and training challenges.
That means taxpayers are likely to encounter delays if they make a mistake when they file — or even if they submit an error-free paper return. Taxpayers who also wait up until the last minute risk accumulating a significant wait time, experts say.
“Getting started early and filing electronically are the two most important things,” Watson says. “What we’re seeing right now is that the backlog is primarily on the paper side. For folks who are looking to submit their return or have to submit corrections and are engaged in that paper process are much more likely to deal with delays this year.”
Your first step should be calculating how much in taxes you withheld during the year, as well as how much in credits you’re expected to receive. This can help give you an idea of your tax refund, as well as any taxes you might end up owing — and you might also be able to catch mistakes early before you file.
Child Tax Credit
If you’re a U.S. household with dependent children, you’ll want to pay careful attention when submitting your tax return this season because it’s your main opportunity to reconcile any missing child tax credit payments — or settle any overpaid balances from throughout the year.
Keep an eye out for “Letter 6419” from the IRS, which should detail how much money you’ve already received through the program.
The maximum credit a household can receive per each child under age 5 totaled $3,600, while the maximum payment for U.S. families with children between the ages of 6 and 17 reached $3,000. Before, the credit was $2,000 for all dependents.
Unless they opted out, most households have likely received half of the credit they’re eligible for via six monthly advance payments. That means they can expect to receive their remaining balance of up to $1,800 or $1,500 on their 2021 tax return, meaning the credit will be slightly smaller than what they’re used to.
On the flipside, taxpayers who opted out of the advance payments will be able to claim the full credit on their 2021 tax return — a sizable return compared to the original $2,000 amount.
Low-income Americans can also expect to receive a bigger child tax credit than they’re used to because the credit was made fully refundable for 2021. U.S. families that adopted a child or had a baby in 2021 will be able to claim any child tax credit money that the IRS hasn’t yet sent them.
Yet, unlike stimulus checks, the IRS will require taxpayers to reconcile any overpayments. That means, if your income situation improved in 2021 or if you claimed fewer dependents last year than the IRS knew about, you’ll have to pay back the overpaid child tax credit.
In most cases, you won’t be hit with a bill because the IRS can settle your balance by dipping into your refund.
To be eligible for the full first $2,000 of the credit, the adjusted gross income (AGI) of married couples filing jointly must not have exceeded $400,000, while for single filers, heads of household, and all other filing statuses, AGI must be less than $200,000. To be eligible for the remaining $1,000 or $1,500, single filers’ earnings can’t top $75,000, heads of households’ incomes can’t surpass $112,500, and married couples can’t make more than $150,000. After that, the credit falls by $50 per every $1,000 over the income threshold.
Third coronavirus stimulus check
Millions of Americans in 2021 were eligible for a third stimulus check worth up to $1,400 per every qualifying individual in their household. If you haven’t yet received it or are missing the full amount for which you’re eligible, you’ll be able to by claiming the 2021 Recovery Rebate Credit.
Start by calculating how much you’re entitled to receive based on your household’s income and number of dependents. Single filers were eligible for the full $1,400 credit so long as their AGI didn’t surpass $75,000, while married filers couldn’t make more than $150,000 and heads of households had to earn less than $112,500. Dependents were also eligible for a $1,400 payment. Then, keep an eye out for “Letter 6475” from the IRS, which should detail how much you’ve already received.
Perhaps the IRS didn’t know you adopted a child or had a baby in 2021; maybe your income situation declined. All those circumstances could combine to make you eligible for additional stimulus money.
Unlike child tax credit payments, the IRS doesn’t expect taxpayers to repay any overpaid money. The IRS, however, will not automatically calculate the 2021 recovery rebate credit for you, meaning it’s up to you to make sure you don’t leave any money behind.
Experts say Americans can amend a submitted tax return if they realize that they forgot to claim a missing stimulus payment after the fact — though that could lead to longer wait times.
“That may take longer to ultimately get the amount that you’re owed,” Watson says. “The IRS is not super aggressive about correcting returns where they owe you money, though they will come after you if you owe them money. That’s where it’ll land on folks to get that money back.”
Nearly 24 million Americans in 2021 applied for jobless benefits, almost 15 percent of the labor force. State unemployment agencies were also paying out an extra $300 each week up until September. All that counts as taxable income for 2021, unlike in the year prior when the first $10,400 of those payments were tax exempt.
That means any benefits you received last year are subject to full taxation. Most automatically end up withholding taxes on their checks, Watson says, but it could add to your tax bill if you forgot.
When to expect your refund — and how to get it fast
If you submit your tax return electronically and without errors, taxpayers should expect to see their refund within 21 days of when they file, so long as they choose direct deposit. The exact timeline, however, depends on how you file and how you want your refund paid out. Here’s an estimate of what you can expect:
— One to three weeks, for those who e-file with direct deposit;
— Three weeks, for those who paper file with direct deposit; and
— Six to eight weeks, for those who e-file or paper file with a refund check in the mail.
Important to note, the IRS cannot legally issue any child tax credit or earned income tax credit refunds before mid-February — a legal requirement designed to prevent the agency from paying out any fraudulent refunds.
Last year, the average tax refund topped $2,800, the agency said.
2022 tax season calendar: Key dates and deadlines to remember
— April 18: Deadline to file your 2021 tax return or request a six-month extension, though you’ll still need to pay any taxes you owe to avoid penalties or fees.
— April 19: Deadline to file your 2021 tax return for taxpayers who live in Maine or Massachusetts.
— October 17: Deadline to file your 2021 tax return if you requested a six-month extension.
— Check with your state’s tax agency to determine when your state taxes are due.
Tax-filing checklist: Key documents you may need to gather
— Form W-2, which your employer will provide. This form lists how much you were paid in 2021, as well as how much in taxes you withheld.
— Form 1098, which shows how much you paid in interest on a mortgage or student loan.
— Form 1099, which reports income that you made working as an independent contractor or from unemployment benefits. You might also receive Form 1099-INT, which reports savings account interest earnings.
— Letter 6419 is intended to help you track Child Tax Credit payments.
— Letter 6475 is intended to help you track Economic Impact Payments.
Bottom line: File early — but don’t rush
The IRS says that electronically filing an error-free tax return is more important than ever this year, using either software, a tax professional or the agency’s Free File program — which is open to any individual who earns $73,000 or less a year.
“Taxpayers should aim to create the least amount of obstacles for the IRS in reviewing their tax filing,” says Tony Molina, CPA, product evangelist at Wealthfront. “The more complications and obstacles you create for the IRS, the higher chance your return will be delayed. You should absolutely aim to file early, but not at the detriment of causing even more delays through filing errors.”
Once you get all your required documents from financial firms and your employers, consider keeping them all in one place by creating a physical or digital folder, Molina says.
Even if you make less than is required to file a tax return ($12,400 for single filers in 2021), you could be leaving money on the table if you choose not to file. Individuals in this tax bracket will need to submit a return to claim any missing stimulus or child tax credit money.
Work with a tax preparer to make sure that you get your questions answered and avoid calling the IRS directly, as the agency says it is still handling a record number of calls with limited resources.
“If you leave this until the last minute, you’ll likely find yourself procrastinating even further and waiting until the last minute to file,” Molina says. “In that case, filing on April 15 will put you at the end of the IRS queue, and that’s the last place you want to be.”