It’s the inevitable: TAX SEASON
While we can’t avoid the inevitable, we can prepare for it, and there’s much to consider when filing for 2021.
For tax year 2020, IRS held millions of tax returns for manual re-calculation because the economic impact payments were not properly reported by the taxpayer. The first and second round payments were paid in 2020 through IRS. Taxpayers who failed to report receiving the payment or who reported amounts that were different than IRS’s records caused their tax returns to be set aside for a manual re-calculation process. IRS reported that as of December 2021, there were still over 6 million individual returns unprocessed. If your tax return showed a refund and was in this queue for manual processing, your refund payment was held, too. For many, the delay was several months.
For 2021 returns, there are two different credits required to be reported. One is the third-round economic impact payment paid in 2021 amounting to $1,400 per eligible individual or dependent. The other is the advance child tax credit payment paid in 2021. The advance child tax credit amount depends on the age of each dependent.
By the end of January 2022, taxpayers will receive IRS letter 6475 showing the amount of the 2021 economic impact payment. Separately, taxpayers will receive letter 6419 showing the amount of advance child tax credit payment(s) received. Please do not discard these letters – they contain important information. Note that even those who opted out of the advance child tax credit payments may still have received one payment.
To be sure that your tax preparer has the information required to be reported on the 2021 return, be sure to include letters 6475 and 6419 with your tax documents. If you did not receive these letters, there are some other methods of obtaining the same information. If you received payments electronically direct to your bank account, review your 2021 bank statements to identify deposits from IRS. Alternatively, you can set up an online taxpayer account with IRS here – Sign in to your Online Account which will give you access to tax records. Helpful instructions can be found here – IRS ID.me
Another option is to have your tax professional request your 2021 account transcript which has information that will help calculate the amounts received. Your tax professional will need to file form 8821 or 2848 with IRS to be allowed access to your account. If you are self-preparing and need help getting transcripts reach out – we can help you! Make an appointment to have a free 40-minute consultation. Book appointment here.