What To Do If You Missed the April Tax Deadline

What To Do If You Missed the April Tax Deadline

Monday, April 18, 2022, was the tax deadline for most taxpayers to file their tax returns, but if you haven’t filed a 2021 tax return yet, it’s not too late. Here’s what you need to do:

First, gather any information related to income and deductions for the tax years for which a return must be filed, then call the office to set up an in-person or virtual appointment.

If you are owed money, then the sooner you file, the sooner you will get your refund. If you owe taxes, file and pay as soon as you can, which will stop the interest and penalties you owe.

If you owe money but cannot pay the IRS in full, pay as much as you can when filing your tax return to minimize penalties and interest. The IRS will work with taxpayers suffering financial hardship. If you continue to ignore your tax bill, the IRS may take collection action.

Some taxpayers may have extra time to file their tax returns and pay any taxes due. These include: individuals living or working in a federally declared disaster area, military service members and eligible support personnel in combat zones, and U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico.

How To Make a Payment

There are several ways to make a payment on your taxes: credit card, electronic funds transfer, check, money order, cashier’s check, or cash. If you pay your federal taxes using a major credit card or debit card, there is no IRS fee for credit or debit card payments, but processing companies may charge a convenience fee or flat fee. It is important to review all your options. The interest rates on a loan or credit card could be lower than the combination of penalties and interest imposed by the Internal Revenue Code.

What To Do if You Can’t Pay in Full

Taxpayers who cannot pay the full amount owed on a tax bill are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be less than if you pay nothing at all. Based on individual circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, a temporary delay, or an offer in compromise. Don’t hesitate to call if you have questions about any of these options.

Direct Pay. For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. Taxpayers who need more time to pay can set up either a short-term payment extension or a monthly payment plan.

Payment Plans. Most people can set up a monthly payment plan or installment agreement that gives them more time to pay. However, penalties and interest will continue to be charged on the unpaid portion of the debt throughout the duration of the installment agreement/payment plan. You should pay as much as possible before entering into an installment agreement.

 

Taxpayers who have a history of filing and paying on time often qualify for penalty relief. A taxpayer generally qualifies if they have filed and paid timely for the past three years and meet other requirements.

 

Your specific tax situation will determine which payment options are available to you. Payment options include full payment, a short-term payment plan (paying in 120 days or less), or a long-term payment plan (installment agreement) (paying in more than 120 days). User fees may apply depending on the type of installment plan you are approved for. A sole proprietor or independent contractor should apply for a payment plan as an individual.

You may qualify to apply online if:

  • Long-term payment plan (installment agreement): You owe $50,000 or less in combined tax, penalties, and interest and filed all required returns.
  • Short-term payment plan: You owe less than $100,000 in combined tax, penalties, and interest.

Cash Payments. Individual taxpayers who do not have a bank account or credit card and need to pay their tax bill using cash are able to make a cash payment at participating PayNearMe payment locations (places like 7-Eleven) in 44 states. Individuals wishing to take advantage of this payment option should visit the IRS.gov payments page, select the cash option in the other ways you can pay section, and follow the instructions.

What Happens if You Don’t File a Past Due Return

It’s important to understand the ramifications of not filing a past due return and the steps that the IRS will take. Taxpayers who continue to not file a required return and fail to respond to IRS requests for a return may be considered for various enforcement actions – including substantial penalties and fees. For example, the failure-to-file penalty is 5 percent of the tax owed for each month or part of a month that a tax return is late. However, this penalty is reduced for any month where the failure to pay penalty also applies. The basic failure-to-pay penalty rate is generally 0.5 percent of unpaid tax owed for each month or part of a month.

Need Help Filing Your 2021 Tax Return?

If you haven’t filed a tax return yet, don’t delay. Contact us today to schedule an appointment as soon as possible.

Getting Ready for the 2022 Tax Filing Season

Getting Ready for the 2022 Tax Filing Season

Filing your tax return promises to be just as complicated as always – especially if you received stimulus payments or advance child tax credit payments. However, there are steps that taxpayers can take right now to make sure their tax filing experience goes smoothly in 2022. Let’s take a look at four things taxpayers can do now to get ready for tax season:

Gather and Organize Tax Records

Organized tax records make preparing a complete and accurate tax return easier. They help avoid errors that lead to processing delays that slow refunds. Having all needed documents on hand before taxpayers prepare their return helps them file it completely and accurately. Important tax records you need to file a return include:

Forms W-2 from employers

Forms 1099 from banks, issuing agencies, and other payers, including unemployment compensation, dividends, distributions from a pension, annuity, or retirement plan

Form 1099-K, 1099-MISC, W-2, or other income statements for workers in the gig economy

Form 1099-INT for interest received

Other income documents and records of virtual currency transactions

Taxpayers should also gather any documents from these types of earnings. People should keep copies of tax returns and all supporting documents for at least three years.

These types of Income documents help taxpayers determine if they’re eligible for deductions or credits. For example, people who need to reconcile their advance payments of the child tax credit and premium tax credit will need their related 2021 information. Those who did not receive their full third Economic Impact Payments will need their third payment amounts to figure and claim the 2021 recovery rebate credit.

 Taxpayers should also keep end of year documents such as:

 Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments

Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit

Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance premium tax credits for Marketplace coverage

Confirm Mailing and Email Addresses and Report Name Changes

To make sure forms make it to taxpayers on time, they should confirm now that each employer, bank, and other payer has their current mailing address or email address. People can report address changes by completing Form 8822, Change of Address and sending it to the IRS. Taxpayers should also notify the postal service to forward their mail online at USPS.com or their local post office. They should also notify the Social Security Administration of a legal name change.

 View Account Information Online

Individuals who have not set up an Online Account yet should do so soon. People who have already set up an Online Account should make sure they can still log in successfully. Taxpayers can use Online Account to securely access the latest available information about their federal tax account.

 Review Proper Tax Withholding and Make Adjustments if Needed

Taxpayers may want to consider adjusting their withholding if they find they owe taxes or receive a large refund in 2021. Changing withholding can help avoid a tax bill or let individuals keep more money each payday. Life changes – getting married or divorced, welcoming a child, or taking on a second job – may also be reasons to change withholding. Taxpayers might think about completing a new Form W-4, Employee’s Withholding Certificate, each year and when personal or financial situations change.

 People also need to consider estimated tax payments. Individuals who receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits, and in some instances, pension and annuity income should make quarterly estimated tax payments. The last payment for 2021 is due on January 18, 2022.

 Tax Season is Right Around the Corner

Filing taxes is inevitable for most people, and with tax law becoming more complex with every passing year, there’s no better time to get ready than right now. Contact us today for a free consultation to find out how we can help.

Common tax return mistakes that can cost taxpayers

Common tax return mistakes that can cost taxpayers

IRS Tax Tips: Issue Number: COVID Tax Tip 2022-11

Common tax return mistakes that can cost taxpayers

Tax laws are complicated but the most common tax return errors are surprising simple. Many mistakes can be avoided by filing electronically. Tax software does the math, flags common errors and prompts taxpayers for missing information. It can also help taxpayers claim valuable credits and deductions.
Using a reputable tax preparer – including certified public accountants, enrolled agents or other knowledgeable tax professionals – can also help avoid errors.
Filing too early. While taxpayers should not file late, they also should not file prematurely. People who don’t wait to file before they receive all the proper tax reporting documents risk making a mistake that may lead to a processing delay.
Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.
Misspelled names. Likewise, a name listed on a tax return should match the name on that person’s Social Security card.
Entering information inaccurately. Wages, dividends, bank interest, and other income received and that was reported on an information return should be entered carefully. This includes any information needed to calculated credits and deductions. Using tax software should help prevent math errors, but individuals should always review their tax return for accuracy.
Incorrect filing status. Some taxpayers choose the wrong filing status. The Interactive Tax Assistant on IRS.gov can help taxpayers choose the correct status especially if more than one filing status applies. Tax software also helps prevent mistakes with filing status.
Math mistakes. Math errors are some of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, tax prep software does it automatically.
Figuring credits or deductions. Taxpayers can make mistakes figuring things like their earned income tax credit, child and dependent care credit, child tax credit, and recovery rebate credit. The Interactive Tax Assistant can help determine if a taxpayer is eligible for tax credits or deductions. Tax software will calculate these credits and deductions and include any required forms and schedules. Taxpayers should Double check where items appear on the final return before clicking the submit button.
Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit. This is the fastest way for a taxpayer to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax return.
Unsigned forms. An unsigned tax return isn’t valid. In most cases, both spouses must sign a joint return. Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney. Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS.
The IRS urges all taxpayers to file electronically and choose direct deposit to get their refund faster. IRS Free File offers online tax preparation, direct deposit of refunds and electronic filing, all for free. Some options are available in Spanish. Many taxpayers also qualify for free tax return preparation from IRS-certified volunteers.

Share this tip on social media — #IRSTaxTip: Common tax return mistakes that can cost taxpayers. https://go.usa.gov/xtbkw

Practitioner coalition urges IRS to step up for tax season

Practitioner coalition urges IRS to step up for tax season

A coalition of 11 stakeholder groups from the tax practitioner community are urging the IRS to take action to reduce unnecessary burdens for taxpayers and practitioners during the upcoming filing season. IRS staff are currently processing a meeting request so that the practitioner groups can elaborate on their recommendations and respond directly to any questions the IRS may have.

The group includes those representing Latinos, Blacks, small businesses, and low-income taxpayers. In addition to the American Institute of CPAs, the group includes Latino Tax Pro, the National Association of Black Accountants, the National Association of Enrolled Agents, the National Association of Tax Professionals, the National Conference of CPA Practitioners, the National Society of Accountants, the National Society of Black CPAs, the National Society of Tax Professionals, Padgett Business Services, and Prosperity Now.

In a letter, the coalition urges the IRS to address the situation faced by practitioners and taxpayers during the filing season ahead.

“Currently, the IRS still has an unprecedented number of unprocessed returns in comparison to years before the pandemic,” they stated in the letter. “Consequently, the IRS sends numerous mistargeted notices, liens and levies. Additionally, the IRS is only answering 9% of all calls, and only 3% of calls regarding individual income tax returns, which prevents taxpayers from resolving these straightforward issues.”

To reduce the need for taxpayers and tax professionals to communicate with the IRS due to the persistent and erroneous notices, the coalition recommends that Treasury and the IRS should:

  • Discontinue automated compliance actions until the IRS is prepared to devote the necessary resources for a proper and timely resolution of the matter.
  • Align requests for account holds with the time it takes the IRS to process any penalty abatement requests.
  • Offer a reasonable cause penalty waiver, similar to the procedures of first-time abate, or FTA, administrative waivers, without affecting the taxpayer’s eligibility for FTA in future tax years.
  • Provide taxpayers with targeted relief from both the underpayment of the estimated tax penalty and the late payment penalty for the 2020 and 2021 tax years.

The letter noted that the COVID-19 pandemic has created enormous challenges for taxpayers, tax professionals, and the IRS: “It is time to take steps to ameliorate the situation. Implementing reasonable penalty relief measures, that the IRS can offer immediately, are necessary to help not only taxpayers and tax professionals but also the IRS during these challenging times.”

“The problems are highlighted by the fact that the IRS is sending out notices to taxpayers that did pay and in fact, their payment has cleared,” noted Stephen Mankowski, tax chair at NCCPAP, one of the members of the coalition. “There are so many cases where people have responded but are getting automated letters putting actual levies and liens against people, and if they try to call they can never get through. The IRS is so far behind that they can’t get to all of the issues.”

Much of this stems from the fact that the IRS is absolutely underfunded, Mankowski observed: “We support giving adequate funding to the IRS.”

Roger Harris, president of Padgett Business Services, another member of the coalition, agreed. “Underfunding of the IRS is a reality. The pandemic made a bad problem worse,” he said.

It’s been suggested that a moratorium on penalties will help the habitual offenders, but that’s unavoidable, according to Harris: “Anytime you have penalties reduced there’s the potential that some bad actors will benefit. But is that enough of a reason to not grant it to the majority who are trying to play by the rules?”

“It really comes down to a question of fairness,” he said. “Taxpayers are being asked to respond in a timely manner and yet the service is not responding in the same timely fashion. Taxpayers and practitioners should not be held to the pre-pandemic standard until the IRS can operate in the same manner. If I get a letter that I have to respond to within 30 days and I bust my tail to respond in time, why does the service take forever, and I can call and not get an answer — why is it just my problem? Let’s recognize that these are not normal times, and we all need some breaks.” https://www.accountingtoday.com/news/tax-practitioner-coalition-urge-irs-to-step-up-for-tax-season

2022 tax filing season begins Jan. 24; IRS outlines refund timing and what to expect in advance of April 18 tax deadline

2022 tax filing season begins Jan. 24; IRS outlines refund timing and what to expect in advance of April 18 tax deadline

WASHINGTON − The Internal Revenue Service announced that the nation’s tax season will start on Monday, Jan. 24, 2022, when the tax agency will begin accepting and processing 2021 tax year returns.

The January 24 start date for individual tax return filers allows the IRS time to perform programming and testing that is critical to ensuring IRS systems run smoothly. Updated programming helps ensure that eligible people can claim the proper amount of the Child Tax Credit after comparing their 2021 advance credits and claim any remaining stimulus money as a Recovery Rebate Credit when they file their 2021 tax return. 

“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop these past several months to prepare,” said IRS Commissioner Chuck Rettig. “The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don’t face processing delays. Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year. And we urge extra attention to those who received an Economic Impact Payment or an advance Child Tax Credit last year. People should make sure they report the correct amount on their tax return to avoid delays.”

The IRS encourages everyone to have all the information they need in hand to make sure they file a complete and accurate return. Having an accurate tax return can avoid processing delays, refund delays and later IRS notices. This is especially important for people who received advance Child Tax Credit payments or Economic Impact Payments (American Rescue Plan stimulus payments) in 2021; they will need the amounts of these payments when preparing their tax return. The IRS is mailing special letters to recipients, and they can also check amounts received on IRS.gov.

Like last year, there will be individuals filing tax returns who, even though they are not required to file, need to file a 2021 return to claim a Recovery Rebate Credit to receive the tax credit from the 2021 stimulus payments or reconcile advance payments of the Child Tax Credit. People who don’t normally file also could receive other credits.

April 18 tax filing deadline for most
The filing deadline to submit 2021 tax returns or an extension to file and pay tax owed is Monday, April 18, 2022, for most taxpayers. By law, Washington, D.C., holidays impact tax deadlines for everyone in the same way federal holidays do. The due date is April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia for everyone except taxpayers who live in Maine or Massachusetts. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states. Taxpayers requesting an extension will have until Monday, Oct. 17, 2022, to file.

ADVANCE CHILD TAX CREDIT AND EIP MUST BE RECONCILED ON YOUR 2021 RETURN

ADVANCE CHILD TAX CREDIT AND EIP MUST BE RECONCILED ON YOUR 2021 RETURN

Article Highlights

  • American Rescue Plan
  • Advance Payments
  • Payment Reconciliation
  • IRS Letter 6419
  • Refund May Not Be as Expected
  • Unusual CTC Circumstances
  • Economic Impact Payment Letter 6475

Early in 2021, Congress passed the American Rescue Plan which included a provision that increased the child tax credit amount and upped the age limit of eligible children. Normally, the credit was $2,000 per eligible child under age 17. For the 2021 tax year, the American Rescue Plan increased the credit to $3,000 for each child under age 18 and to $3,600 for children under age 6 at the end of the year.

Even though the benefit of a tax credit traditionally isn’t available until after the tax return for the year has been filed, for 2021 the new tax law included a provision to get the credit benefit into the hands of taxpayers as quickly as possible and charged the Secretary of the Treasury with establishing an advance payment plan. Under this mandate, those qualifying for the credit would receive monthly payments starting in July equal to 1⁄12 of the amount the IRS estimated the taxpayer would be entitled to by using the information on the 2020 return. If the 2020 return had not been filed or processed yet by the IRS, the 2019 information was to be used.

However, since the IRS only estimated the amount of the advance payments, some taxpayers may have received too much and others not enough. Thus, the payments received must be reconciled on the 2021 tax return with the amount that each taxpayer is actually entitled to. Those who received too much may be required to repay some portion of the advance credit while some may be entitled to an additional amount.

To provide taxpayers with the information needed to reconcile the payments, the IRS has begun sending out Letter 6419, an end-of-year statement that outlines the payments received as well as the number of qualifying children used by the IRS to determine the advance payments. For those who filed jointly on their prior-year return, each spouse will receive a Letter 6419 showing the advance amount received.

Do not discard the letter(s) from the IRS as they will be required to properly file 2021 returns.

Having received the advance credit payment, taxpayers will find their refunds will be substantially less than they may have expected, or they might even end up owing money on their tax return unless their AGI is low enough to qualify for the safe harbor repayment protection for lower-income taxpayers, in which case the excess advance repayment is eliminated or reduced.

Example: If a taxpayer received advance child tax credit payments for two children based on the 2020 return, and the taxpayer doesn’t claim both children as dependents in 2021, the taxpayer would need to repay the excess on their return, unless they are protected by the safe harbor provision.

It is also possible that one taxpayer could have received the advance child tax credit payments based on their 2020 return and not have to make a repayment under the safe harbor rule, while another taxpayer, who can legitimately claim the child, can get the credit on their 2021 tax return. This is most likely to happen when the parents are divorced. So, there’s the potential for the child tax credit to be received by both parents.

Economic Impact Payment (EIP) Letter – The IRS will begin issuing Letter 6475, regarding the third Economic Impact Payment, to EIP recipients in late January. This letter will EIP recipients determine if they are entitled to and should claim the Recovery Rebate Credit on their tax year 2021 tax returns filed in 2022.

Letter 6475 only applies to the third round of Economic Impact Payments that were issued starting in March 2021 and continued through December 2021. The third round of EIPs, including the “plus-up” payments, were advance payments of the 2021 Recovery Rebate Credit that would be claimed on a 2021 tax return. Plus-up payments were additional payments the IRS sent to people who received a third EIP based on a 2019 tax return or information received from the Social Security Administration, Railroad Retirement Board, or Dept. of Veterans Affairs; or to people who may be eligible for a larger amount based on their 2020 tax return.

Most eligible people already received the payments. However, those who are missing stimulus payments should review the information to determine their eligibility and whether they need to claim a Recovery Rebate Credit for tax year 2020 or 2021.

Like the advance CTC letter, the EIP letter includes important information that can help tax preparers quickly and accurately reconcile the Recovery Rebate Credit when preparing 2021 tax returns.

Common tax return mistakes that can cost taxpayers

Make final 2021 quarterly tax payment by Jan. 18; avoid surprise tax bill, possible penalty

IRS Newswire: IR-2022-03 January 5, 2022

WASHINGTON − The IRS urges taxpayers to check into their options to avoid being subject to estimated tax penalties, which apply when someone underpays their taxes. Taxpayers who paid too little tax during 2021 can still avoid a surprise tax-time bill and possible penalty by making a quarterly estimated tax payment now, directly to the Internal Revenue Service. The deadline for making a payment for the fourth quarter of 2021 is Tuesday, Jan. 18, 2022.
Income taxes are pay-as-you-go. This means that taxpayers need to pay most of their tax during the year as income is earned or received. There are two ways to do this:
• Withholding from paychecks, pension payments and some government payments, such as Social Security benefits or unemployment compensation. Most people pay their tax this way.
• Making quarterly estimated tax payments throughout the year to the IRS. Self-employed people and investors, among others, often pay tax this way.
Act now to avoid a penalty
Either payment method–withholding or estimated tax payments–or a combination of the two, can help avoid a surprise tax bill at tax time and the accompanying penalty that often applies.
If a taxpayer failed to make required quarterly estimated tax payments earlier in the year, making a payment soon to cover these missed payments will usually lessen and may even eliminate any possible penalty. Because the penalty calculation considers the date on which the payment or payments were made, even making a payment now, rather than waiting until the April filing deadline, often helps.
Who needs to make a payment
People who owed tax when they filed their 2020 tax return may find themselves in the same situation again when they file for 2021. This will likely be true, especially if they failed totake action to avoid another shortfall by increasing their withholding during 2021.
People in this situation often include those who itemized in the past but are now taking the standard deduction, two wage-earner households, employees with non-wage sources of income and those with complex tax situations.
In addition, families who received advance payments of the Child Tax Credit during 2021 but don’t expect to qualify for the credit when they file their 2021 return, may need to make an estimated tax payment.
Additional points to consider:
• Most income is taxable. Besides wages, interest and other investment income, which also includes income related to virtual currencies, refund interest and income from the gig economy are taxable.
• Unemployment compensation is fully taxable in 2021. The American Rescue Plan Act of 2021 allowed an exclusion of unemployment compensation of up to $10,200 for 2020 only. Often, this means that an estimated tax payment should be made, especially if no federal income tax was withheld from these payments.
• Various financial transactions, especially late in the year, can often have an unexpected tax impact. Examples include year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds, and stocks, bonds, virtual currency, real estate or other property sold at a profit.
The Tax Withholding Estimator, available on IRS.gov, can often help people determine if they need to make an estimated tax payment.
Alternatively, taxpayers can use the worksheet included with estimated tax form 1040-ES, also available on IRS.gov. In addition, Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations.
How to make an estimated tax payment
The fastest and easiest way to make an estimated tax payment is to do so electronically using IRS Direct Pay. Taxpayers can schedule a payment in advance for the January deadline.
Taxpayers can now also make a payment through their IRS Online Account. There they can see their payment history, any pending or recent payments and other useful tax information.
The IRS does not charge a fee for these services. Plus, using these or other electronic payment options ensures that a payment gets credited promptly.
For information on other payment options, visit IRS.gov/payments.

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