10 things to know as 2022 tax season kicks off 

The tax filing season opened with a whimper this year, as the IRS warned of severe understaffing and shared that it still has millions of backlogged items to address. Last year’s tax season was challenging for this reason, and this year’s may be equally challenging.  

Taxpayers will once again need to practice patience as they wait for their tax returns to be processed. It’s also important to consult with your tax professional as soon as possible – this is not a year to procrastinate. However, there is some good news for taxpayers: the 2022 tax season brings few tax law changes from last year.  

The following are 10 key items to keep in mind as you prepare to file your 2021 taxes.

1. Individuals and most corporations must file and pay by April 18th

Perhaps the biggest difference this year is that the government has not extended tax filing deadlines. Individuals and most corporations must file and pay by April 18, 2022 (Taxpayers in Maine and Massachusetts have until April 19, 2022) or request a filing extension through October 17, 2022. Remember, an extension gives you more time to file, not to pay.

S corporations and partnerships must file and pay by March 15, 2022, or request a filing extension.

2. Expect IRS delays

The IRS began this tax season still behind on 2020 tax return filings. The agency’s funding and staffing remain relatively low, and phone inquiries are at record highs. Taxpayers and tax professionals are spending a lot of time on hold. The IRS is also behind on processing power of attorney documents that allow a tax practitioner to speak to the IRS on behalf of a client.

Kaufman Rossin’s tax team has seen some cases where the IRS acknowledges receiving taxpayers’ forms but has taken more than a year to process those forms. Some issues that tax professionals used to be able to address with a phone call to the IRS now must be addressed by mail and can take well over a year to resolve. IRS delays are the “new normal.”

If you have any ongoing tax situations, monitor them closely and stay in touch with your tax professional. Talk to your professional right away about any questions or letters from the IRS. And discuss with your tax team any steps you should take to minimize the ramifications of delays in resolving IRS-related issues.

3. File your tax return electronically and use direct deposit

The two most important things filers can do this season are to file electronically and confirm the information on their returns is accurate. If possible, use the IRS’s e-file option or have your tax professional file electronically on your behalf (at Kaufman Rossin, we file 98% of returns electronically). If you are expecting a refund, use direct deposit to expedite processing of your refund payment. Use the IRS’s Direct Pay portal if you owe money, if you have to make individual estimated payments or if you are filing an extension and owe money.

Filing electronically helps to speed up processing of your tax return and any refund. It also makes it easier for the taxpayer and the IRS to trace, track and address returns that aren’t properly processed or that have delays.

4. Watch for IRS letter on advance Child Tax Credit

If you received advance Child Tax Credit (CTC) payments, you should have received a letter from the IRS: Letter 6419. This letter should give your tax professional an accurate total of payments you received during 2021. You can also check this number on the CTC Update Portal.

To compare advance payments with the actual credit you can claim, your professional will use Schedule 8812. Many taxpayers have received less in advance CTC payments than they can claim. This presents an opportunity to consult with your tax professional to claim any additional credits you may be eligible for.

Eligible taxpayers will receive the second half of the credit after filing their 2021 tax return. And those who did not receive advance CTC payments can claim the full credit on their return.

Taxpayers who received more in advance CTC payments than they can claim as a credit should confer with their tax professional to calculate whether they have to pay back any amount.

5. Watch for IRS letter on Economic Impact Payments

The IRS has started issuing letters to taxpayers who received a third Economic Impact Payment. Letter 6475 should include accurate information about any stimulus payment received. The letter will also help determine if you are eligible to claim the Recovery Rebate Credit for missing stimulus payments. You can also see your Economic Impact Payment amounts via your IRS online account.

Let your tax professional know if you receive this or any other letters from the IRS. It’s important for you to hold on to these letters, as this information can help you quickly and accurately file your 2021 federal tax return and avoid additional processing delays.

6. Claim charitable contributions

As was the case for tax year 2020, taxpayers who do not itemize deductions on their 2021 tax return can still deduct a portion of charitable contributions made with cash. Up to $300 for individuals and up to $600 for joint filers can be deducted from taxable income, in addition to the standard deduction.

7. Forgiven student loan debt may not be taxable

In an exception to typical rules, most student loan debt forgiven during 2021 and through 2025 is not included in taxable income at the federal level. If you had a loan forgiven last year, you might not receive Form 1099-C from the lender.

8. Obtain last year’s AGI without a processed tax return

E-filing of a 2021 return normally requires your Adjusted Gross Income (AGI) from your 2020 return. If your 2020 return has not been processed, the IRS says to enter $0 for last year’s AGI on your 2021 return. Also, if you used a Non-Filer tool in 2021 to register for an advance Child Tax Credit or Economic Impact Payment, enter $1 for last year’s AGI.

9. Follow-up on refunds expected to cover required estimated payments

If you are waiting for a refund that you directed the IRS to apply to future required estimated payments, talk with your tax professional. The IRS may not have processed your request yet.

10. Other considerations for businesses

In addition to the items mentioned above, business owners should also keep these three considerations in mind as they prepare to file their 2021 corporate tax return:

• • Employers that claimed COVID-related payroll tax credits during 2021 should be aware that these credits will reduce the wages-paid deduction.
  • Companies that had a Paycheck Protection Program (PPP) loan forgiven are required to file special reporting paperwork. The forgiven loans are not taxable.
  • The deadline to file forms 1095-C and 1094-C reporting employee health insurance coverage has been extended to March 31, 2022, if e-filing and to February 28, 2022, if filing by mail.

Looking ahead: Be proactive in 2022 tax planning

Very few new tax-related provisions were passed by Congress during 2021, but that doesn’t mean tax law changes won’t be enacted this year. Proactively communicate with your tax professional so you can be prepared to make tax-related moves if any tax changes occur.

Contact the Kaufman Rossin tax advisory team for assistance with filing your 2021 tax return and planning ahead for your 2022 tax bill.