The first day U.S. taxpayers could file their 2021 return was Jan. 24, 2022; however, if you receive a 1099 from a brokerage firm, you probably won’t get the forms you need until mid-February. Even then, there is a good chance that you’ll be notified a few weeks later that there is a correction, and the 1099 will be reissued.
Furthermore, you may not have all the forms you need. You’ll need to wait until you have IRS Letter 6419 in hand if you received any Child Tax Credit payments in 2021. Likewise, if you received the third stimulus payment, you’ll need to wait for IRS Letter 6475. Both these letters outline how much you received in advance payments of the Child Tax Credit or stimulus money, which is important because the IRS needs to reconcile what you received in 2021 with how much credit you can claim when you calculate your return.
So why is there so much hype about filing early? The earlier you file a complete and correctly prepared return, the quicker the IRS can process it. The key there is “complete and correctly prepared,” so it is imperative you have all the forms you need. It’s no surprise the IRS has alerted the public to possible delays this year because of COVID and staffing. Furthermore, they have extended the average time it should take to process a refund to three weeks, assuming your return is filed electronically with a direct deposit refund.
Other important notes for the 2022 filing season include paying close attention to tax withheld on unemployment benefits. Congress has not passed a waiver of tax as they did in 2020, so if you did not have withholding from your benefits in 2021, you may owe money and possibly underpayment penalties this tax season. If you find yourself in this situation, the sooner you calculate what you owe, you can begin saving to pay by April 18, 2022, the due date for filing and payment of 2021 taxes.
Taxpayers who claim the standard deduction can claim up to $300 for single, $600 for married filing jointly, for cash contributions made to charities. This provision was extended through the end of 2021 by the Taxpayer Certainty and Disaster Tax Relief Act of 2020. Cash contributions don’t include the value of volunteer services, securities, or property, so unfortunately, that couch you donated to Goodwill won’t count.
If you’re a W2 employee, you cannot take a home office deduction, even if you worked from home most of the year. If you traded bitcoin, Ethereum, Dogecoin, or other cryptocurrencies, you could be subject to capital gains, depending on how much you gained or lost and how long you held the tokens. Your exchange should provide you a Form 1099-B, summarizing profits and losses. Be aware that the government is more interested than ever in collecting taxes on crypto investments. These are just a few areas that need attention when preparing your return.
As always, the fastest way to get the refund you’re due is to file electronically and request direct deposit for any refunds. Refunds for paper returns can take six to eight weeks. And of course, don’t forget to complete your state return if you live in one of the 42 states that collect income tax.
If you have questions on completing your 2021 income tax return, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the January 29, 2022 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
