The last couple of years have been unusual in so many ways, and that has extended into how we do our taxes. As tax season kicked off at the end of January 2022, there were still millions of people waiting for the IRS to process their 2020 tax returns. Stimulus payments, unemployment, and the Child Tax Credit have also introduced new complications for many filers. So as we all get organized for tax season, it’s important to remember a few things so that you can be sure that your taxes are filed correctly and your refund gets to you as quickly as possible.
Although the IRS started processing 2021 tax returns on Jan. 24, don’t worry if you haven’t even started yours yet. After all, companies and other organizations had until Jan. 31 to mail out W2s, 1099s, and other tax forms, so lots of us didn’t even have all of the needed paperwork on the 24th! The deadline to file your tax return (or request an extension) is Monday, April 18, in most states and territories. However, April 18 is Patriots’ Day in Massachusetts and Maine, so residents of those states have until Tuesday, April 19, to file.
Avoid Common Mistakes
The biggest mistake to avoid is waiting too long to get your documents together. Taxes are a little more complicated this year, and some of us have a lot of paperwork to gather. Get started now to make sure that you have all of the documents, receipts, and other paperwork needed to file your taxes and get every deduction coming to you.
Sometimes, people avoid filing their tax returns because they know that they’ll owe money and they can’t afford to pay a lump sum. If this is your situation, you should know that you do have options. It’s possible to apply for a title-secured loan to help. The IRS also allows taxpayers to set up payment plans. Don’t let a fear of not being able to pay keep you from filing.
The average tax return check is around $3,000, so many people do get refunds from the IRS. If you are one of the ones getting a check, don’t blow through it. This is a great opportunity to add to your emergency savings account or allocate the money toward another goal, like a down payment on a house or a fund to replace your car.
Writing Off COVID-19 Expenses
Who hasn’t racked up COVID-related expenses? At-home test kits and face masks have been a common expense for almost everyone. And if you or a family member actually came down with COVID-19, you probably incurred medical expenses. The good news is that if the money you spent on COVID-related expenses was more than 7.5% of your adjusted gross income, you can deduct that amount on your tax return. However, if your health insurance reimbursed you for any eligible expense, you can’t deduct it. If you didn’t spend enough to deduct expenses, there’s still a chance that you can get some sort of tax benefit: The IRS is allowing the costs of hand sanitizer, home testing kits, and masks to be reimbursed through flexible spending accounts or health savings accounts.
Child Tax Credits
One mistake people with children should be careful not to make this year involves the Child Tax Credit. If you received advance Child Tax Credit payments, you need to add those up and deduct that amount from the total Child Tax Credit that you’re eligible for ($3,000 for each child age 6 and older and $3,600 for each younger child). You cannot claim the full credit amount if you received these payments: If you double-claim the credit, you’ll end up owing the amount of overage back to the IRS.
Avoiding Tax Refund Delays
The best way to avoid having your refund held up is to file electronically. The IRS is dealing with a serious backlog of returns, and paper returns are going to take much longer to process. Not only should you be filing electronically, but you should make sure to send along the information to have your refund directly deposited into your bank account. The credits you’re claiming may also make a difference in how long your return takes to process: Anti-fraud measures tied to the Child Tax Credit and the Earned Income Tax Credit could delay your refund until at least March, according to the IRS. Once you file your return, the IRS website and app can show you the status of your return and your refund.
Security Is Important
One of the plagues of modern life is identity theft. One trick thieves use is to file fraudulent returns using the real Social Security numbers of actual people. How can you prevent your identify from being stolen when you file your taxes? One of the best ways to protect yourself is to file your return as quickly as possible. The other thing everyone should do is obtain a PIN from the IRS that will verify your identity when you file
File for Free
The IRS and commercial tax preparation websites offer free filing for some people. Those who make less than $73,000 per year are eligible for free guided online tax preparation, as long as they don’t have more complicated issues like working as an independent contractor or needing to claim education tax credits. All tax filers are able to use the free forms found on the IRS website. These free forms require filers to do their own math and have last year’s tax returns available to carry over some information. You may also be able to take advantage of these free programs to help you file your return:
- VITA (Volunteer Income Tax Assistance): The IRS offers the Volunteer program to help those who need the most help file their taxes. The program is for anyone with disabilities, those who make under $57,000 a year, or people who don’t speak fluent English.
- Cash App Taxes: Formerly known as Credit Karma Tax, this service charges $0 to file no matter what your tax situation is, so those with investment income or those who work as freelancers can still use this service and pay nothing.
- E-File: This tax preparation website offers free federal tax filing for those who qualify. It also offers paid tiers for those who have more complex tax situations.
- H&R Block: The biggest tax preparation service in the country offers free filing for those who qualify. Their free filing service allows you to claim things like the Earned Income Tax credit.
- TaxAct: TaxAct allows qualifying taxpayers to file their federal and state returns for free. If you used H&R Block or TurboTax last year, TaxAct can import your information for no charge. TaxAct shows your estimated return throughout the process of filling out your taxes and has a tracker so you can quickly check the status of your return.
- TaxSlayer: TaxSlayer offers chat, email, and phone support for all customers, including those who qualify for and use the free filing option. Like with the other offers, you need to have relatively simple taxes to qualify to use their free federal and state filing services.
- TurboTax: The free edition of TurboTax is aimed at taxpayers filing Form 1040. The website has a list of forms the free version supports so you can make sure it has everything you need for your tax situation.