Tax Season 2022
Every year there are things that we need to be on the lookout for when it comes to tax season. In 2022, this year is no different.
There is one major thing this year though, and some bad news if you’re hoping got a prompt response when it comes to refunds. The reason for that is the backlog in the IRS workload. Close to 24 million taxpayers are still waiting for their tax returns from last year to be processed— a number far larger than previously reported by the Internal Revenue Service — with many refunds being held up for 10 months or more. The Treasury Department warns that the backlog will probably further slow service in the 2022 filing season, expecting IRS response time to be subpar this year. The leftover backlog of 2020 returns is unprecedented (6 million individual returns as of December 31). And telephone lines continue to be jammed.
The cause of this issue is no secret. The IRS’s productivity plummeted during the coronavirus pandemic as thousands of employees worked from home for months without access to returns, audits and other business. The federal stimulus measures also added to the agency’s already packed workload, as it emphasized getting relief money to millions of Americans. Paper returns took the greatest hit, as mail piled up on trucks outside closed offices for months. So we’re now seeing an effort to recover from that and the results are predictably slower response times.
It’s not all bad news though. In early February, the agency reported that it has gotten off to a productive start to the 2022 season. According to their numbers, they received a total of over 16 million returns and processed close to 13 million of those, with refunds averaging $2,201 being issued to over 4 million taxpayers. They are expecting to get 160 million individual returns this filing season for the 2021 tax year.
For most taxpayers, the due date to file and pay is Monday, April 18, 2022, another unusual situation because the typical April 15 date falls on Emancipation Day this year. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states. Victims of tornados in Illinois, Tennessee, and Kentucky and victims of wildfires in Colorado will have until May 16 to file and pay. Taxpayers requesting an extension will have until Monday, Oct. 17, 2022, to file.
If you haven’t yet filed, some helpful advice is to ensure you get your refund without delay is to file electronically, file accurately, and request a direct deposit. If possible, do not file a paper return. And if all goes smoothly, you should get your refund within 21 days. Last year’s average tax refund was more than $2,800.
In terms of your actual tax return, here are some things to be aware of.
One of the biggest and most talked-about new tax provisions for the tax year 2021 is the expanded 2021 Child Tax Credit. Under the American Rescue Plan, it was expanded and increased and for the first time, you may be able to claim the Child Tax Credit for your dependent aged 17.
The American Rescue Plan also made some major changes to the Child and Dependent Care Credit — so if you sent your kids to daycare, summer camp, or even sports camps so you could work, you may be able to claim an increased credit. Under the new provision, the credit is also fully refundable, meaning you can still get the credit even if you don't owe any taxes.
There were also increased benefits under the Earned Income Tax Credit, but possibly the main question on a lot of taxpayers’ minds is this: “What about the third stimulus check?” You should know that like other stimulus payments the third stimulus will not be taxable. It will be reconciled on your 2021 taxes, meaning you will include the amount you received for the third stimulus on your 2021 taxes when you file.
* For more details on these changes and for any other questions regarding your tax returns, consult a tax professional or CPA.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.
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