Newsletter
The 2021 tax year is near its close, and it’s time to file the 2022 tax return. Like most important things in life, it can be advantageous to get started early. There are many reasons to start looking at your 2021 financial activities now.
Taxpayers who take their time to organize their tax records are less likely to miss the finer details of their tax returns. That means less likelihood of getting notice or being audited for making a mistake. It can also mean avoiding missing out on the tax credits and potential tax refunds they are entitled to.
For many taxpayers, taxes can be complicated. Some individuals have multiple forms of income and engage in multiple forms of spending entitling them to deductions. But there is little reason to worry if you can start making sense of your taxes early on. With the online resources available to taxpayers, this can be a very simple process.
For taxpayers to ensure they get their taxes filed on time and without errors, there are a few key steps they can take.
Gather and Organize Your Tax Records
The first step is simply taking the time to organize tax records and ensuring all the necessary documentation is prepared. Exact requirements will depend on the nature of each taxpayers’ income and deductions. For example, if someone is going to claim itemized deductions, they must file a Schedule A.
The average taxpayer will need to include the following documents in their tax returns:
- Form W-2 statement from their employer for income
- Form 1099 for other standard forms of income (unemployment benefits, pension distributions & annuities, etc.)
- Form 1099-INT for interest received
If a taxpayer works in the gig economy, they will need to fill out at least one of:
- Form 1099-K
- Form 1099-MISC
- Form W-2
Regardless of the form filled out for the taxpayer’s specific type(s) of earnings, supporting documents are also required. Taxpayers should keep copies of each document filed for at least three years.
Lastly, things change in the world of taxes. Keeping up with what’s new this year in tax return filing helps taxpayers ensure they don’t miss any changes to the Tax Code.
Check on Advance Child Tax Credit Payments
In the case that a taxpayer claimed advance Child Tax Credit payments in 2021, they can compare them with the Child Tax Credit amount claimable in 2022 (2021 tax year). If the taxpayer received less than expected, they could claim the outstanding balance on their 2021 tax return.
Of course, if the opposite is true, the taxpayer may need to make a repayment this year. In January 2022, the IRS sent out a Form 6419 listing how much taxpayers received from Child Tax Credit payments in 2021.
Economic Impact Payments and Recovery Rebate Credit
Some taxpayers didn’t qualify for the third Economic Impact Payment or did not receive the full amount. For those taxpayers, claiming the Recovery Rebate Credit may be possible. They must file their 2021 tax return to claim the credit.
To claim the correct amount for the Recovery Rebate Credit, taxpayers must have the amounts of their third Economic Impact Payments, as well as any Plus-Up payments they received. These figures should be double-checked to avoid any possible delays and facilitate a faster refund.
Again, the IRS sent a document for this. A Form 6475 was sent out to taxpayers listing out the total balances of third Economic Impact Payments and Plus-Up Payments. These forms should be copied and filed alongside other IRS documents listing out stimulus payments.
Confirm Mailing and Email Addresses
If a taxpayer has changed their mailing and/or email addresses since the last filing, they should notify the IRS, their employer, and their bank. This can help make sure taxpayers get all their documents on time.
In terms of informing the IRS, taxpayers can fill out a Form 8822 Change of Address. Sending Form 8822 Change of Address to the IRS will update the taxpayer’s address in the IRS records. Then, they should notify the postal service through USPS.com or at the local post office.
Review Tax Withholding for Adjustments
Sometimes, taxpayers discover that they still owe taxes or were overpaid in refunds during the tax year. If this is the case, the taxpayer can adjust their withholding to avoid a large tax bill. Failing to do so may result in a large bill or keeping less of their paychecks each payday if they chose a payment plan.
Often, life changes will result in the need for tax withholding adjustments. For example, if a taxpayer gets married or divorced, they will likely need to adjust their tax withholding. Having a child or taking a second job, including starting with an income-producing gig, also often justifies tax withholding adjustments.
Article Topics
Taxes
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