There are changes to the tax law every year, and 2022 is no exception. The pandemic continues to affect our taxes as we recover whether it’s new provisions like the advance Child Tax Credit or how unemployment taxes are handled. Plus, there are some changes for inflation to the tax brackets and standard deductions.
As you begin to file your taxes in 2022, for the income you earned in 2021, you’ll want to be aware of some important changes to the tax code.
2020′s Continued Effects in 2022
Due to the pandemic and the resulting economic shutdown, many taxpayers lost their jobs or lost interest in their previous careers.
Instead, they decided to participate in “The Great Resignation” by striking out as first-time small business owners and freelance agents. As a result, the Internal Revenue Service (IRS) became flooded with phone calls asking for help with self-employment deductions on tax returns.
Read more: Taxes for Freelancers
The newly enhanced advance Child Tax Credit payments also provided an element of confusion for most taxpayers, causing the phone lines of the IRS to ring off the hook. The IRS teams became overwhelmed, and the public faced processing delays.
As a result, the IRS still has unprocessed returns from at least 10 million taxpayers from 2021′s filings, according to the annual report by the National Taxpayer Advocate. The IRS predicts that your federal tax returns will take longer than usual to process this year if you paper file so make sure you e-file with direct deposit. The quickest way to get your tax refund. Last tax season more than 75% of taxpayers received a tax refund and the average tax refund was more than $2,700 so file as soon as possible so you can be the first in line for your tax refund. The IRS states that most taxpayers will receive their tax refunds within 21 days or less of acceptance when they file electronically with direct deposit if there are no issues with their tax return.
Our experts at Dough Roller recommend forgoing a paper tax return to minimize processing delays in 2022.
When Does Tax Season Start and End in 2022?
Tax season 2022 (to file 2021 taxes) begins on January 24 and ends on April 18 for most states.
You might notice that April 18 is a later cutoff date for tax season compared to previous years. When the April 15th deadline falls on a weekend or legal holiday you have until the next business day. This tax year, you can thank the Emancipation Day holiday in Washington, D.C., for the extended tax filing deadline.
If you live in Maine or Massachusetts, you can complete your state taxes later than the rest of the United States. Residents of Maine and Massachusetts can file their taxes up to April 19 due to the observance of Patriot’s Day.
Victims of the 2021 Colorado fires and the December tornadoes in Tennessee, Kentucky, and Illinois do not have to file their state taxes until May 16. People serving in the U.S. Armed Forces also receive a tax extension of 180 days after leaving their combat zone.
If you think you will not be able to file your taxes on time, you’ll need to apply for an extension by April 18, this extension will give you until October 17 to file your tax return. Keep in mind it gives you an extension to file but not an extension to pay if you owe taxes.
Are you still concerned about filing your taxes on time? Reach out to the tax experts at TurboTax. With TurboTax, you can swiftly complete your taxes by choosing from one of the three options:
- Do it yourself: File electronically for your refund on your own
- Use TurboTax Live: Have live experts answer your questions along the way and review your return before you file.
- Use TurboTax Live Full Service: Have a dedicated tax expert do your taxes for you, start to finish
Income Tax Brackets for 2021 (Income Earned in 2021)
When it comes to taxes, the amount of your income during your 2021 tax year is a large factor in determining how much you pay when you file in 2022.
The 2021 tax brackets are now as follows:
- 10% – Single adults earning up to $9,950 and married adults filing jointly earning up to $19,900
- 12% – Single adults earning $9,951 - 40,525 and married adults filing jointly earning $1,901 - 81,505
- 22% – Single adults earning $40,526 - 86,375 and married adults filing jointly earning $81051 - 172,750
- 24% – Single adults earning $86,376 - 164,925 and married adults filing jointly earning $172,751 - 329,850
- 32% – Single adults earning $164,926 - 209,425 and married adults filing jointly earning $329,851 - 418,850
- 35% – Single adults earning $209,426 - 523,600 and married adults filing jointly earning $418,851 - 628,300
- 37% – Single adults earning $523,601 and above and married adults filing jointly earning $628,301 and above
Keep in mind, just because you are in a certain tax bracket does not mean that you will pay the percentage at a flat rate. For example, a single person who has a taxable income of $40,000 would fall in the 12% tax bracket. But they would pay 10% on their income up to $9,950 and then 12% on the remaining $30,050.
If you find the nation’s filing season process confusing, we recommend using TurboTax for your tax filing needs.
Higher Standard Deductions for 2021 (Income Earned in 2021)
The standard deductions fluctuate each year to attribute to the changing cost of living. Your standard deduction depends on your filing status. For example:
- Married couples who file a joint tax return have a standard deduction of $25,100
- Single taxpayers and married individuals who file their taxes separately have a standard deduction of $12,550
- Heads of households have a standard deduction of $18,800
You can opt to take the standard deduction or itemize, which is where you calculate your deductions one by one. Typically, it only makes sense to itemize if your deductions exceed the standard deduction for your filing status.
Are you uncertain as to whether itemizing your deductions or accepting the standard deduction is the right choice for your money? Contact the tax professionals at TurboTax. With TurboTax, you can have a dedicated tax expert by your side. Also, TurboTax will automatically choose the right option for you (standard versus itemized) that will maximize your deductions based on your entries.
How the Earned Income Tax Credit Benefits You
While tax deductions lower your taxable income, a tax credit can lower your actual tax bill. One common and expanded tax credit in 2022 is the Earned Income Tax Credit (EITC).
The amount of the credit may be up to $6,728 for those with three or more children. But you don’t have to have children to qualify. Non-parents may qualify for up to $1,502. Here’s more information on the amount you could qualify for.
If you are married filing jointly with three children you may qualify if you have earned income under $57,414 and investment income under $10,000. Here’s more information on how to qualify for the EITC.
It’s important to note that the EITC is a refundable credit. This means that if you qualify for a refundable credit and the amount of the credit is larger than the tax you owe - you will get that money back to you in a refund.
Another tax provision extended into the tax year 2021 is the ability to use your 2019 income, instead of your 2021 income if it will help you claim Earned Income Tax Credit or more Earned Income Tax Credit.
The Advance Child Tax Credit Payments
In 2021 the federal government sent advance child tax credit payments to eligible families. These payments were sent in anticipation of child tax credits that would be requested during the 2022 filing season.
The Internal Revenue Service (IRS) sent out Letter 6419 to report what you received in advance child tax credits. This amount will be deducted from the total child tax credit you will be eligible for.
It is important to have IRS letter 6419 in front of you when you file your taxes if you received advance payments. You will need to report the correct amount that you received to avoid any processing delays of your return and your tax refund.
After filing your 2021 tax return, you will have received the entire credit amount you were eligible for, just half was likely received from July 2021 to December 2021 during the year. Hence the name “advance child tax credit”.
Don’t worry about reporting your advanced payments, TurboTax has specific guidance to help you report the advanced payments on IRS letter 6419 or you can connect to a TurboTax Live tax expert if you need help.
Navigating Work From Home, Unemployment, and Receiving a Stimulus Check
Work from home, unemployment applications, and stimulus checks became common household phrases in 2020. In 2022, you might still be dealing with coronavirus (COVID-19) economic impacts and maybe wondering about the effects on your 2021 tax return.
Work From Home
If you are self-employed and ran a business from your home during 2021 you may be eligible to claim a home office deduction for the space in your home exclusively used for your business.
This home office deduction is reserved for those that are self-employed. Unfortunately, if you are like many who have been working from home as an employee you are not eligible to claim this deduction.
In 2020, the first $10,200 of unemployment benefits were tax-free. However, the IRS did not extend this provision for the 2021 tax year. If you were unemployed in 2021 and did not have taxes withheld on your benefits, it is possible you may have to pay taxes on those benefits.
If you did not receive the third of Economic Impact Payment (stimulus) or did not receive the total stimulus check you are eligible for, you may be able to claim the Recovery Rebate Credit (RRC) on your 2021 tax return. Note that you can only claim the RRC for the third stimulus payment on your 2021 tax return.
Also, new this year, the International Revenue Service (IRS) sent out Letter 6475. Letter 6475 includes how much money you received from the third Economic Impact Payment. If you did not receive the full amount of the third stimulus you are eligible for or none at all and you are eligible, make sure you enter the correct amount included on your letter 6475 so that you can claim the Recovery Rebate Credit you are eligible for and avoid any processing delays with your return. TurboTax also has specific guidance to help you report the amount on letter 6475 and claim the Recovery Rebate Credit. You can also connect to a TurboTax Live tax expert to get help along the way or fully hand your taxes over.
What Is the Fastest Way To Get My Tax Refund?
Going through America’s tax returns is a massive undertaking for the IRS. Due to the IRS’s tremendous backlog in processing paper tax returns, if you chose to file your tax return by paper, you might have received last year’s average tax refund later than you had hoped – or perhaps you’ve not yet received it. The IRS reports that nine out of 10 taxpayers will receive their refund in 21 days or less when you e-file with direct deposit if there are no issues with your return.
If you would like to mitigate delays on your tax refund, these are some important steps that may help you this tax season.
- Avoid filing a paper return. Instead, file your taxes online with TurboTax.
- Provide your routing and account number. Once the IRS has your bank account information, your tax refund can be received via direct deposit.
- Be sure to have your Letter 6419 or Letter 6475 when preparing your 2021 tax return to make sure you are reporting accurate information about any advance Child Tax Credit payments or third stimulus payments you may have received.
- Be patient. If your tax return requires special handling, your refund may take longer to reach you.
File Your Taxes the Right Way With TurboTax
Each year, the IRS reminds people of the upcoming tax return deadline, yet multitudes still miss the cutoff date. The IRS now stands ready to accept and process returns. Are you prepared with your tax statements and documentation?
At Dough Roller, we are all about teaching people money management, accruing wealth, and investing for a bright financial future. We find that most people experience confusion regarding placating the IRS and ensuring their maximum tax refunds. Some common questions include:
- Do I qualify for a refund?
- How do I make charitable, medical, and business deductions?
- What are education credits?
- Does my 401k or IRA affect my tax bill?
- When will the IRS issue refunds?
- How can I track my refund?
- Can I file my taxes for free?
If you are also struggling with these questions, we recommend using TurboTax, an online tax service that can provide you with expert help.
Receive Your Maximum Refund With TurboTax
TurboTax works to make the tax year 2021 easier by:
- Combing through every applicable deduction and credit to increase your refunds
- Ensuring perfect calculations (If the calculations are incorrect, TurboTax will pay the IRS penalties)
- Extensively reviewing your documentation to ensure that you do not accidentally break the law by filing incorrectly
- Providing free professional guidance in the event of an audit
- Speedily completing your electronic tax paperwork
- Emailing you when your tax refunds are available
- Offering unlimited advice from live tax experts as you do your taxes, or matching you to a dedicated expert to do it all for you, from start to finish with TurboTax Live Full Service