Your Guide to the 2022 Tax Season

Tax season 2022 is already underway. How prepared are you? Here’s your comprehensive guide to deadlines, deductions, refunds, and more.

As Benjamin Franklin said, “in this world, nothing is certain except death and taxes.” Tax season is no one’s favorite time of year; the best strategy is to get through as quickly, efficiently, and accurately as possible. This is what you need to know about filing your 2022 taxes.

When Are Taxes Due?

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Traditionally, taxes are due on April 15. However, the actual due date has been different recently. In 2020, the date was pushed back to July 15. The following year, taxes were due on May 17. Will we be back on track for 2022?

The answer is: almost. The actual due date falls on April 18 this year for federal income taxes. That’s because Washington, D.C., will be observing Emancipation Day on April 15. The holiday marks the anniversary of President Abraham Lincoln signing the Emancipation Proclamation.

Taxes must be postmarked or e-filed by midnight on April 18 in order to avoid late penalties. Some post offices may be open late, but make sure to check with your local branch before counting on it.

Can You Get an Extension?

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For anyone filing state taxes in Maine or Massachusetts, you’ll get an extra day automatically. Patriot’s Day, which commemorates the first battles of the Revolutionary War, is celebrated on the third Monday of April. That just happens to be April 18, so people filing in those states can submit their paperwork on April 19 without penalty.

In addition, residents of Colorado, Illinois, Kentucky, and Tennessee who experienced a natural disaster have been granted an additional grace period to file their taxes. Their filing date is May 16 this year. If you think you might qualify for that extension, reach out to your local tax office for confirmation.

For everyone else, it’s possible to file an extension. You’ll need Form 4868 to file an extension, which will grant you an additional six months to complete your paperwork. However, just because you have an extension doesn’t mean you can wait six months to pay your tax bill. If you owe money on your taxes, you need to pay it by the April 18 filing deadline regardless of any extensions.

What Documents Will You Need to File Your Taxes?

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Your employer should have already sent you a W-2; the deadline to receive it was January 31st. But that might not be the only piece of paperwork you need for your 2022 taxes.

If you received money from unemployment insurance, retirement plans or pensions, or returns from dividends, it’s all taxable. You should get a 1099 from each source of income. 1099 is a big umbrella that also includes money from working in the gig economy or taking on freelance work.

If you bought or traded cryptocurrency in 2021, it’s treated as an asset like stocks. Because cryptocurrency exchanges have until 2023 to start issuing 1099-B forms, it’s your responsibility to keep track of your crypto transactions.

Form 1095-A is the Health Insurance Marketplace Statement. If you took advantage of the Affordable Care Act to purchase insurance, you’ll need this form to complete your taxes.

How Will Being Self-Employed Change Your Taxes?

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Amid the surging unemployment of 2021, many Americans decided to start their own business or try freelancing. Those people may be in for a rude awakening come tax season. Self-employment taxes are much more complicated than a traditional W-4, and it’s likely that the IRS will be receiving plenty of returns with mistakes.

Generally, self-employed filers need to pay a quarterly tax bill based on the estimated amount they will owe at the end of the year. This means that the first time you file—assuming that you weren’t already making quarterly payments—you’ll need to pay your entire bill for 2021 and the estimated taxes for the first quarter of 2022 at the same time. Self-employed people must pay both income tax and Social Security and Medicare taxes; in traditional employment, the latter two taxes are covered by your employer.

If you’re new to self-employment, it’s a very good idea to sit down and talk to a tax professional. Make sure to bring all your business receipts and records of payments accepted. Depending on whether you were selling tangible goods versus services, you’ll need to file different forms. You may also be on the hook for state sales tax.

The Employee Retention Credit expired in 2021, so small businesses with employees shouldn’t count on it for this year’s taxes. There may be other changes that impact your self-employed, gig economy, or small business taxes, so be sure to proceed carefully or reach out for help from a professional.

Read More: Tax Deductions You Might Be Overlooking

Are Benefits You Received in 2021 Taxable?

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One possible piece of good news is that if your income changed after March 2021, such as through job loss, you may still be able to claim the final $1400 stimulus check from last year.

Unemployment insurance payments are taxable—and if you didn’t withhold the correct amount from your checks, you could be facing a tax bill now. Many people choose not to withhold enough money from unemployment checks as it’s already a challenge to get by on a reduced income.

If you received any student loan forgiveness last year, that money is no longer considered to be taxable income. That’s great news for people working in education and other public sector jobs who qualify for forgiveness on their student loans. On the other hand, if you did not make loan payments during the period of suspension, you won’t get to claim a deduction on the interest paid as you can in normal years.

Be advised that if you received bonuses from your employer, such as a quarterly bonus or a hiring/retention bonus, that money is taxable! Typically, even if income tax is initially withheld from those bonuses, it must be filed as supplemental income on your income tax return. Supplemental income is subject to a different tax rate than the rest of your paycheck.

What About the Child Tax Credit?

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According to the Motley Fool, “a lot of households received money in advance from the boosted Child Tax Credit, half of which was paid out in monthly installments between July and December of 2021.”

Although the total amount of the credit is larger–$3600 for children under the age of six compared to $2000 in previous years—parents already received half of it. That means the refund they receive in 2022 will actually be $1800, not the usual $2000. Parents should brace themselves for a smaller-than-expected deposit this year.

CBS News reported that tax filers who claim either the Child Tax Credit or the Earned Income Credit may face extended delays in processing. The IRS is attempting to clamp down on fraud, so parents and low-income families may end up having to wait longer to receive their refunds.  

How Quickly Will You Get Your Refund?

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It takes the IRS less time to process electronic tax returns than paper returns, so if you want to get your refund as soon as possible, file online. It’ll still take at least three weeks to get your direct deposit, however. An added bonus of filing online is that you can use the “Where’s My Refund” tool on the IRS website or official app to track the progress of return.

If you plan on filing a paper tax return, you can expect to wait at least six weeks. That wait could get even longer, depending on how our ongoing public health crisis impacts the IRS. Processing paper copies takes longer, even under the best of circumstances. You’ll also have to wait longer for your refund if you choose to receive a paper check instead of a direct deposit.

Most financial experts are recommending that you file your taxes as soon as possible this year. Between the complicating factor of last year’s stimulus checks, chronic underfunding, and the ongoing chaos of the pandemic, the IRS is anticipating significant delays.

What Should You Do with Your Refund?

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It’s tempting to spend your refund as soon as you get it—perhaps on one of the best items to buy the month you get your check—but consider saving it instead.

“Instead of just spending that windfall, or letting the money slip through your fingers, be sure to save some of it. With inflation, the ongoing pandemic and so many people quitting their jobs, it’s more important than ever to have a healthy chunk of emergency savings,” financial expert Lynette Khalfani-Cox told NPR.  

If you don’t already have an emergency fund that will cover six months of living expenses, then make that your top priority. If you already have a robust emergency fund, then consider paying down debt or investing your tax refund.

And if you end up owing taxes this year, you have options. Ideally, you will pay off the full amount when you file. However, you can also apply for a payment plan. The IRS offers three tiers of payment plans:

  • Paying in full within the next ten days
  • Paying in full within 10-120 days
  • Paying in installments each month

You can find out more about potential payment plans at the official IRS website.  

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