Five Things to Know for the 2022 Tax Season
The IRS began accepting tax returns on January 24th, so it’s official: tax season is upon us! As you’re preparing your return, there are some important changes to keep in mind—along with the usual to-dos.
Here are five things we feel you should know for this tax season.
Key Documents You Need To File
The key to having a stress-free tax season is pretty straightforward: stay organized. The more scrambling you have to do to hunt down documents and receipts, the greater your chances of missing a deduction.
Let’s get ahead of it by introducing the main players. Here are several common documents you may need this tax season:
- Form W-2: This will list your income for 2021 and let you know how much was withheld in taxes. Your employer will provide this for you.
- Form 1098: This form documents how much interest you paid on a mortgage or student loan in 2021.
- Form 1099: This form reports the income you made as an independent contractor or freelancer, or from unemployment benefits and other miscellaneous income streams.
- Form 1099-INT: This form will list any savings account interest earnings.
- Letter 6419: This form will detail how much money you received in Child Tax Credit payments throughout 2021.
- Letter 6475: This form will report the Economic Impact Payments you received, if you received them.
Even professional tax preparers understand the importance of being organized and having all the vital documents in one place. Most will provide you with a checklist or have you complete a form called a tax organizer.
While preparing to file your taxes, it’s imperative to keep in mind all deadlines and key dates so you stay on track with getting your tax return filed in time. The IRS is very fond of those who miss deadlines and loves to access fines and penalties.
The deadline for most individuals to file their federal 2021 tax return or request an extension is Monday, April 18th. However, if you live in Maine or Massachusetts, the deadline is Tuesday, April 19th, thanks to the Patriot’s Day holiday.
Should you successfully request a six-month extension, Monday, October 17th is the deadline to file your federal 2021 tax return.
At the state level, though, deadlines vary—so check with your state’s tax agency to get the correct date.
If you’re an entrepreneur, things are a little more complicated: business return deadlines can vary depending on the type of business entity you run. To keep things simple, we’ll only focus on calendar-year filers for this article. The deadline to file business tax returns for partnerships, S corporations, or LLCs taxed as partnerships is Tuesday, March 15th. The deadline for C corporations, sole proprietorships (Schedule C), and single-member LLCs or LLCs taxed as corporations is Monday, April 18th.
The Child Tax Credit
Whether you received the Advance Child Tax Credit in 2021 or not, tax season is the time to reconcile those payments to determine your eligibility or receive any amounts you may be owed. Please be on the lookout for IRS letter 6419, which will report how much money you received in 2021 for the Advance Child Tax Credit. In 2021, the maximum credit a household can receive for children under 5 years old was $3,600, and $3,000 for families with children from 6 years old to 17 years old.
Even though many households received half of the new child credit in 2021 via monthly child tax payments, they are still entitled to receive the remainder of their credit when they file their 2021 tax return.
If your household opted out of the advance payments, you can claim the full credit on your 2021 tax return.
However, if you received an overpayment of the Child Tax Credit, you will have to pay back the overage to the IRS. An overpayment might happen if you have fewer dependents now than in previous years, or if your income improved in 2021.
Many Americans were eligible to receive a third stimulus check worth up to $1,400 (or $2,800 for those married filing jointly). However, if you never received it, or only received a portion of the amount you qualified for, you may be able to claim it through the 2021 Recovery Rebate Credit.
Unlike the Child Tax Credit, the IRS does not expect repayment if you receive an overpayment on stimulus checks. However, you will need to calculate the 2021 Recovery Rebate Credit yourself based on your Letter 6475 to ensure you are not missing any money you’re entitled to—or get a qualified tax professional to help.
Until September of 2021, state unemployment agencies were still paying an extra $300 a week to people receiving unemployment benefits. Unlike the 2020 tax year, all unemployment benefits are taxable income for your 2021 tax return—so if you forgot to withhold any taxes from your unemployment benefits in 2021, you might want to be on the lookout for any additional taxes due.
In closing: yes, taxes can be complicated! If you don’t feel confident in filing your taxes yourself (understandable), we strongly recommend seeking professional help from a tax expert. With your trusted tax professional preparing your tax return, we would love to assist you with tax planning with our Felton & Peel Wealth Management advisors.
As the tax deadline approaches, the clock is ticking—so give us a call today.