Tax Season is Starting Sooner Than You Think

On Monday, the IRS announced that it will begin processing and accepting 2021 tax returns on Monday, January 24. This year, the tax filing deadline is Monday, April 18th. Currently there is no tax season extension expected, similar to the extensions that have occurred the last two filing seasons.

Processing Times

In a statement, the IRS announced that most taxpayers can expect to receive their refund within 21 days of electronically filing the return, unless there’s an issue with processing their tax return. In order to provide the fastest processing time for returns, the IRS is urging taxpayers to electronically file their tax returns. While many people were able to receive tax returns in the regular processing time last year, any taxpayers whose returns required a manual review by the IRS experienced massive delays in processing time. Therefore, we advise making sure that all information is fully verified and accurate before completing your return.

Even though no major tax reform was passed last year, a string of COVID related credits and deductions will likely add complexity to your tax return this year. The advance Child Tax Credit payments, Child and Dependent Care Credits, and third round of stimulus payments to name a few can all result in much longer return delays if the IRS sees a discrepancy on the return.

One item that could cause additional processing times for returns is the current backlog that the IRS still must process. It is estimated that roughly 6 million returns are still being processed with the IRS from the 2020 filing season. In order to avoid extended processing times, the IRS has listed off four steps taxpayers can take:

1. File electronically and avoid paper tax returns

2. Use direct deposit

3. Pay extra attention to Economic Impact Payments or advance Child Tax Credit payments from 2021

4. Make sure the correct amounts are reported on your tax return

Advance Child Tax Credit Payments

In late December, the IRS started issuing the first batch of advance Child Tax Credit letters. They expect these letters to be sent out through January. In the letter, they taxpayer will be notified of the amount they received in 2021 from the advance Child Tax Credit payments. This letter will be critical to accurately filing your 2021 tax return.

Taxpayers can also see the payments received by using the CTC Portal available on IRS.gov. For more information on the Child Tax Credit payments, see our previous 3 part article series, covering What Families Can Expect from the Expanded Child Tax Credit in 2021, How Will the New Child Tax Credit Impact Your 2021 Tax Return?, and Making the Most of Your Child Tax Credit Payments.

Third Round of Stimulus Payments

The IRS also announced that in late January, they will begin sending Letter 6475, titled “Your Third Economic Impact Payment,” to individuals who received a third payment in 2021. While most people who received their stimulus payments in 2021 will not see a material impact on their tax return, those that received partial or no stimulus payments in 2021 may be able to claim the Recovery Rebate Credit on their 2021 tax return for any missing payments. Individuals can also use the IRS portal to view the payments they received for the stimulus payments (titled Economic Impact Payments).

Phone Wait Times

Unfortunately, if any issues do arise with a tax return, the IRS expects phone lines to continue to be as backed up as they were last year. During the 2020 filing season, the IRS received 4 times the usual amount of calls due to COVID related changes such as the stimulus payments and American Rescue Plan Act. Due to the record number of calls coming in and the number of returns still being processed by the IRS, Monotelo does not anticipate hold times to be reduced in 2022.

The IRS Commissioner Chuck Rettig recently stated, “In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs. This is frustrating for taxpayers, for IRS employees and for me.”

For some information, such as stimulus payments, advance Child Tax Credit payments, and more, the IRS is urging taxpayers to go online when given the option. Chuck Rettig also recently stated, “Our phone volumes continue to remain at record-setting levels. We urge people to check IRS.gov and establish an online account to help them access information more quickly.”

While the last two tax seasons have proven that longer processing times, hold music, and unexpected delays may just be a part of our "new normal," you can help to avoid or even eliminate much of these headaches by confirming that all of your relevant tax information is gathered and accurate before giving your tax documents to Monotelo Advisors.

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