This week, a press release was issued confirming that IRS will begin accepting and processing 2022 tax year returns on Monday, January 23, 2023, marking the “official” opening to this year’s tax season.The announcement also provides an optimistic outlook for a much smoother tax season this year in light of increased staffing and ongoing improvements made possible by the passage of the Inflation Reduction Act (the Act) in August of 2022. That said, they also acknowledge that the volume and complexity of returns can make timing unpredictable.
What we do know is that in the months since the Act was signed, significant investments have been made into systems improvement and readiness, including tackling the backlog of languishing returns from the past three years due to the pandemic. More importantly, the multi-year funding has allowed for extensive hiring and training of telephone assistors and in-person staff to provide taxpayer support for the more than 168 million returns that are expected to be filed between now and mid-April.
And speaking of April…thanks to the celebration of Emancipation Day in DC, we all have an “extra” three days to file our individual Federal returns this year. The filing season deadline for individual returns or extension requests is Tuesday, April 18, 2023. Most states, including Massachusetts, have followed suit for state returns. And even if you haven’t thought about it just yet, now is the time to start gathering your documents to avoid processing delays!
Remember the American Rescue Plan Act of 2021? That was the third economic stimulus package that was passed in the middle of tax season last year. Now, a year later, taxpayers who got third-round Economic Impact Payments (EIP) were supposed to have received IRS Letter 6475 detailing the amount in order to report it on their 2021 tax returns.
Well guess what? That hasn’t happened, and letters now aren’t expected to arrive before March, so we’re here to help you get us the information we need to avoid delaying your returns.
Keep reading to find out what to do.
Third Round Stimulus: How Much Did You Get?
It’s been almost a year since these payments were issued, so it’s not surprising that most people aren’t sure of the exact amount they received, but that’s what we need to know to process your return. It’s worth noting that we have had some clients tell us they didn’t receive any third round EIP, only to find out that they were mistaken when taking a second look. So it’s definitely worth doing a little legwork now to avoid a lot of potential headache later.
In the absence of Letter 6475, there are a number ways you can find the amount of your third Economic Impact Payments. Here are your options:
Locate Your Notice 1444-C, Your Third Economic Impact Payment. These letters were sent from the IRS in April 2021, after the last stimulus payments were made. If you are organized enough to have tucked this letter into your 2021 tax folder last spring, it will show you the total amount of the third payment, as well as “plus-up” payments for those who were eligible. It looks like this:
Request Your 2021 Account Transcript, which can be done several ways:
online or by mail using Get Transcript on the IRS website.
by calling the automated phone transcript service at 800-908-9946
by submitting Form 4506-T
Check Your Bank Statements from March or April 2021 (or later). If you had direct deposit, the EIP should appear credited to your account in late March or April. If you received a paper check and procrastinated before make the deposit, you should look at the following months.
Access or Create a Personal Online IRS Account. If you have already created an online account at IRS.gov, once you sign in, you’ll find the information on the Tax Records tab/page under the section “Economic Impact Payment Information”. If you don’t have an online account, it’s not a bad idea to create one, just know it will take some time, and require you to also have or create an “ID.me” account for verification. Learn more…
So, if you are 100% certain that you either received the full amount of EIP ($1400 each for you and your dependents) OR, were above the threshold and didn’t get anything, a verbal confirmation either way should suffice. Otherwise, some proof of the exact amount is the only way to be sure your return won’t go to the back of the line, resulting in a probable delay of six months or more for the correction to be processed.
When is Tax Day 2022?
The deadline for filing your Federal Taxes this year is Monday, April 18, 2022. This is because even though April 15th is a Friday, it is also Emancipation Day, which is celebrated in Washington, DC, causing all businesses and government offices to close.
Residents of Massachusetts and Maine have until Tuesday, April 19, 2022, in observance of the state’s Patriots Day holiday.
The deadline for filing your Federal Taxes this year is Monday, April 18, 2022. This is because even though April 15th is a Friday, it is also Emancipation Day, which is celebrated in Washington, DC, causing all businesses and government offices to close.
Residents of Massachusetts and Maine have until Tuesday, April 19, 2022, in observance of the state’s Patriots Day holiday.
We continue to encourage everyone to use the client portal for the safest transfer of documents, but are happy to be able to provide alternatives to accommodate what works best for you!
Sending Us Hard Copies of Your Documents?
Priority Mail is best! The U.S. Post Office offers free tracking with Priority Mail, and has the best rates for anything under two pounds. We do NOT recommend sending via FedEx. Our FedEx delivery person often leaves packages in the main building lobby rather than bringing them to our office.
Reminder:We do not need your medical receipts, only the total you spent if you think you have enough to deduct.
Dropping Off?
We have a secure lockbox set up just inside our office door, along with hand sanitizer, pens, and large white envelopes if needed. Please do not put anything through the mail slot, as we cannot guarantee the safety of your information unless it is in our locked dropbox.
Make sure your documents are sealed in an envelope with your name on the outside before placing in the locked dropbox. The box is emptied and the area sanitized every half hour!
Your Returns are Ready for You to Sign. Now What?
Once we have completed your returns, we will give you a call, and you can choose to have us send them to you via Priority Mail, or you can come to our office to retrieve them.
If you choose to come to our office to pickup your tax return:
Please call us from the parking lot when you arrive.
We will place your documents on one of two desks (A or B) just inside our office.
Once you know which table your documents are on, you may enter the office to retrieve them.
You may opt to take your return back to your car to look over and sign before leaving. However, we recommend that you take your return home to review before sending the signed copy back to us for filing.
What to look for if you are picking up documents from our office.
Paperless Bill Payment
Did you know you can pay your Business Bookkeeping Services invoice online? We have a secure payment gateway which can be accessed from the homepage of our website for your convenience. You can pay your invoice by credit card through this link instead of writing a check! Easy.
The passage of the most recent stimulus package —The American Rescue Plan— is good news for most taxpayers. However, particularly for those who received unemployment benefits in the last year, implentation of the bill after the start of tax season is creating some confusion.
Shortly after the president signed the Act, IRS issued a statement indicating that a software update will be installed to address any potential issues with 2020 tax returns. In the meantime, the main takeaways with regard to unemployment are:
The American Rescue Plan includes a retroactive benefit that will make the first $10,200 of unemployment income from 2020 non-taxable for individuals who earned less than $150,000.
IRS is urging taxpayers who are eligible for this benefit to delay filing pending the software industry update that will account for the adjustment.
Taxpayers who have already filed their 2020 returns should also wait to see if an amended return will be necessary.
For our clients who meet the eligibility requirements of the unemployment provision:
If we have already processed your taxes and it is determined that an amended return is necessary, the update will be filed after April 15th, per IRS guidance.
If we have your information and/or your documents are in progress, we will be holding your return pending the Federal and State software updates before filing.
If you have any questions about the unemployment provision in the most recent stimulus, IRS has posted more detailed information here.
As we head into another pandemic tax season, all indications are that the IRS still hasn’t caught up from last year, and that ongoing staffing issues and changes resulting from stimulus payments are going to make this year even more challenging. You can read more about it in this article from The Washington Post.
The good news is that we have done our homework and compiled an updated list to help prevent delays and surprises with your returns. There are new wrinkles this year, like IRS letters 6419 (Advance Child Tax Credit) and 6475 (Third Round Economic Impact Payment) that we MUST have in order to process your return. We need the two IRS letters listed above to process your income tax return. If the credits we list on your tax return do not match what is on file with IRS it will take 5-6 months for IRS to process your tax return after we file it for you. Also, if the credits we list do not match IRS records this will change the refund or balance due amount on the tax return.
We have also included timeless reminders and best practices we think you’ll find helpful in getting organized well in advance of filing deadlines.
Don’t throw out any mail you get from IRS! Even if it looks insignificant, what we submit on your behalf MUST match what the IRS has on record, or your return will be delayed by as much as 6 months! Examples of letters you might receive, like those mentioned above, are further detailed below.
Got kids? New This Year: If you received the monthly child tax credits in 2021 you will be receiving IRS Letter 6419. This IRS letter will indicate the amount of the credit received in 2021 and the number of qualifying children used to calculate that amount. We need a copy of this letter to process your tax return. From July through December 2021, eligible taxpayers were allowed to receive up to $300 per month for children under 6 and $250 per month for children 6-17. People who received the monthly payments can also check how much they received through the CTC Update Portal on the IRS website. If you received the monthly child tax credits in 2021 you will be receiving. We MUST have a copy of this letter to process your tax return!
Remember that 3rd round of stimulus that happened in March, after lots of people had already filed their 2020 taxes? People who received the third stimulus check, officially called the 2021 Economic Impact Payment, will receive Letter 6475 from the IRS. This will help them determine if they received the EIP or if they should claim the Recovery Rebate Credit on their 2021 income tax return we file for you this year. “Letter 6475 only applies to the third round of Economic Impact Payments that was issued starting in March 2021 and continued through December 2021,” the IRS said on its website. “The third round of Economic Impact Payments, including the ‘plus-up’ payments, were advance payments of the 2021 Recovery Rebate Credit that would be claimed on a 2021 tax return. This is important information for your Tax preparer.
The health of our staff is the single biggest factor in our ability to continue operating at maximum efficiency during tax season. Due to the COVID-19 virus we have changed how we operate in this new climate. Keeping our employees and clients safe is a top priority, so we will not be having in-person appointments, but we will have a safe and secure drop off and pickup protocol for you. We also require that you wear a mask when you enter our office (even if you are vaccinated).
Filing season is expected to begin on January 24, 2022, but as we know from last year, that date can be a moving target amid the pandemic. As soon as we have confirmation of an “official” start date we will notify clients by e-mail.
Tax Year Organizers will be going out to clients shortly—no need to contact us to request yours! Keep an eye out for an e-mail from SecureFile Pro that lets you know it’s been uploaded to the portal.
Make sure we have your preferred e-mail address. If this is the inbox where you like to hear from us, you can call this one done! If there’s a different e-mail we should use, please send your update to [email protected]
Collect any questions you have about your return and include them, in writing, with your documents on the portal. This will enable us to address specific questions about your individual return while we are working on it and have your information in hand.
Provide us with all your information, all at one time. Stops and starts slow everything down.
Did you collect unemployment in 2021? If so you will receive Form 1099-G in the mail from The Commonwealth of Massachusetts. You can see an example on our previous checklist post here.
Health Connector Insurance? If your health insurance is through the Health Connector you will receive a copy of Form 1095A in the mail. You can see an example on our previous checklist post here. Make sure to include it with your documentation.
Estimated tax payments? If you paid estimated taxes in 2021 and January 2022 please list the date(s) of payment and the amount(s) paid.
Keep your medical receipts—at home. Please provide only the total amounts if you know you spent enough itemize.
Visit our website for office updates. And if you are a client and not on our mailing list, please join using the opt-in link on our website home page. It is important that you join our e-mail list now more than ever because this will be our main line of communication.
Please be patient. Like most businesses these days, COVID-19 has greatly impacted our operations. Following these guidelines will truly help minimize interruptions and keep things running most efficiently!
The need to manually process tax returns is slowing refunds
If you feel like you’re having to wait longer than usual for your refund this year, you’re probably right. In prior years, tax refunds have generally been issued within 21 days of a return being filed. For many taxpayers right now, that time window has increased to as much as six or eight weeks.
Why? Well, the IRS was already burdened with COVID-related staffing shortages and the accompanying massive backlog of unopened mail in the wake of the CARES act when the Consolidated Appropriations Act of 2021 was signed in December of 2020. This second round of stimulus required additional changes to IRS forms and software. Then, the American Rescue Plan went into effect on March 11, 2021—after the start of an already delayed tax season—and IRS was forced to incorporate yet more guidance to address the included relief for millions of taxpayers who received unemployment benefits in 2020.
Unfortunately for many early filers, the timing of COVID relief provisions is working against them. A recent article published by USA Today and posted on yahoo!Finance identified the single biggest challenge the IRS is facing in expediting 2020 refunds: Nearly 30 million returns require manual processing this year.
Among the reasons behind the unprecedented necessity for manual processing are insufficient time for software updates, inconsistencies on individual returns, and a lingering backlog of paper returns.
If you’re one of the people waiting for a refund and want to check the status of your 2020 tax return you can try the “Where’s My Refund?” tool on IRS.gov, and/or download the IRS2Go mobile app, which may have more specific information about your individual return.
Unemployment benefits is shown on the business photo using the text
The IRS guidance we have been waiting for regarding tax returns with unemployment claims that were filed prior to the American Rescue Plan has arrived.
IRS issued a press release yesterday, Wednesday, March 31, stating that they are taking steps to identify and recalculate returns that are eligible for the $10,200 unemployment income deduction under the third stimulus package, but filed before the provision was passed. You can read the online press release here.
Once the new AGI is calculated, IRS will automatically issue refunds , or apply available funds to money that is owed. This takes the burden off early filers who might have otherwise had to file amended returns.
The announcement of an extension for filing and payment of taxes this year does give people some breathing room as far as sorting out some issues brought about by the stimulus package that passed after the start of tax season, though we are still waiting guidance on some issues, as well as software updates to address the unemployment benefit deduction.
Here is what we can tell you:
Business Bookkeeping Services does not have any information about individual clients’ stimulus payments.
IRS issued a press release today, March 22, announcing the disbursement of more stimulus payments. Direct deposit payments should be in bank accounts by March 24, 2021. For those without direct deposit, you are advised to keep an eye on your regular mail for paper checks and/or prepaid debit cards. Visit the online press release here for more information about what to look for so you don’t accidentally throw it away!
If you think you are eligible for a payment and have not received it yet, you can check the Get My Payment tool on IRS.gov on to see if the your payment has been scheduled. The site has detailed information and easy-to-follow instructions.
Any payments you received from the three rounds of economic stimulus are not taxable, but they must be reported on your returns (Rounds 1 & 2 for 2020; Round 3 for 2021). Because of this, everyone needs to keep a record of these payments, including the amount(s) you received and when. No one wants to backtrack at the end of the year to try and find information from 10 months before, so save yourself the trouble and start a tax folder for 2021 right now.
For people who received unemployment benefits in 2020 and filed their taxes before the American Rescue Plan stimulus package passed, IRS is reinforcing previous guidance asking taxpayers not to file amended returns. The plan to address these discrepancies is through software designed to identify and correct returns that are eligible and automatically issue refunds. We do not, however, have a timeline for when this software will launch.
The recent notices from IRS have come while we continue to await guidance from Massachusetts on how to handle the $10,200 stimulus unemployment income deduction at the state level. We are continuing to move forward with what we can in the meantime.
Don’t forget to start your tax folder for next year! Hopefully some things will be back to normal by then, but you will still need to know how much stimulus money you received this year.
Your paycheck holds a lot of important information, but for most people, as long as the money is coming in, the actual paystub is out-of-sight and out-of-mind. The fact is, your paystub can be the difference between a tax refund or bill at tax time, as well as a playing a key role in getting a loan, or even verifying your identity in the fight against tax fraud. Below are the Top 3 Reasons why it’s a good idea to make sure you have access to your paystubs, either online or in hardcopy, and why it’s important to check them periodically.
Getting a Refund vs. Owing Money at a Tax Time: Changes in tax laws, marital status, or even a slight bump in your income that puts you in a higher tax bracket can unwittingly leave you owing money at the end of they ear when you used to see a refund. The best way to prevent this from happening is to periodically look at your paystub to see exactly how much is being taken out of each one based on your “withholding allowances.” Unfortunately, withholding is one of those things that is usually set up on the first day of a new job as part of the paperwork, and never looked at again. There are basic guidelines about who should claim how many allowances based on your number of dependents, Head of Household status, but with so many people working second or part-time jobs, or joint filers with spouses who work, the standard guidelines don’t always make sense if you want to avoid owing money at tax time. See our previous post about where on your paycheck you’ll find your withholding elections, and if too much or too little is being taken out every month, you should fill out a new form W-4. The sooner you do it, the smaller the adjustment needs to be to rebalance your tax debt to your preference.
Identity Theft & Fraud Prevention: With the widespread tax fraud across the country this year—particularly with respect to unemployment, paystubs have taken on even greater importance. As efforts increase at both the state and federal level to guard against tax fraud, paystubs are among the documents being requested to verify identity. For this reason, we are urging clients to make sure they have a copy of their last paystub of the year readily available—either electronically or in hard copy. We have seen instances where processing tax returns has been denied until these documents are produced.
Income Verification: There are seemingly mountains of documents that lenders require when applying for a loan—whether it’s a mortgage, Home Equity line of credit, or a personal loan. Paystubs are just part of the equation, but lenders want to know that you’ve got money coming in so you’ll be able to pay them back for the money going out. Depending on the frequency with which you get paid, they may ask for two or more paystubs, but regardless how many, they must be the most recent ones. Having easy access to your paystubs is one step toward making the process easier.
