Earlier this month, the National Taxpayer Advocate, Erin M. Collins, released her 2021 Annual Report to Congress in which she warned of the IRS’ backlog of over 10 million unprocessed returns entering this tax season and her expectation of delayed refunds. While clients can rest assured that Sciarabba Walker will work to file their tax returns as efficiently as possible, the need for proper preparation has never been greater.
If you haven’t prepared yet for tax season, here are some quick tips to help speed processing and avoid hassles.
Tip 1: Gather all documents needed to prepare an accurate return. This includes W-2 and 1099 forms. In addition, you may have received statements or letters in connection with Economic Impact Payments (EIPs) or advance Child Tax Credit (CTC) payments.
Letter 6419, 2021 Total Advance Child Tax Credit Payments, tells taxpayers who received CTC payments how much they received. Since the advance payments represented about one-half of the total credit, taxpayers who received CTC payments need to file a return to collect the rest of the credit. Letter 6475, Your Third Economic Impact Payment, tells taxpayers who received an EIP in 2021 the amount of that payment. Taxpayers need to know the amount to determine if they can claim an additional amount on their tax returns.
Taxpayers who received an EIP or CTC payments must include that information on their returns. Failure to include this information, according to the IRS, means a return is incomplete and will require additional processing, which may delay any refund owed to the taxpayer.
View the IRS guide to gathering year-end income documents here.
Tip 2: Check the information on your prepared return. Each Social Security number on your tax return should appear exactly as printed on the Social Security card(s). Likewise, make sure that names aren’t misspelled. If you’re receiving your refund by direct deposit, check the bank account number.
Failure to file or pay on time
What if you don’t file on time or can’t pay your tax bill? Separate penalties apply for failing to pay and failing to file. The penalties imposed are a percentage of the taxes you didn’t pay or didn’t pay on time. If you obtain an extension for the filing due date (until October 17), you aren’t filing late unless you miss the extended due date. However, a filing extension doesn’t apply to your responsibility for payment. If you obtain an extension, you’re required to pay an estimate of any owed taxes by the regular deadline to avoid possible penalties.
The penalties for failing to file and failing to pay can be quite severe. (They may be excused by the IRS if your lateness is due to “reasonable cause,” such as illness or a death in the family.)
If you have any questions, please reach out to your personal Sciarabba Walker contact or email us at email@example.com.
Source: Thomson Reuters Checkpoint