Tax season is now open
As we enter the third fiscal season of the COVID-19 era, I advise you to take a deep breath. It will be another confusing year as Americans try to reconcile special stimulus measures on their tax forms and others scramble to claw back missing funds from the past two years. Here’s a handy Q&A
which addresses the biggest issues of this year.
Q: When are taxes due?
A: Unlike the past two years, when the IRS delayed tax filing due to the pandemic, we’re back in April, with a caveat. Instead of the usual April 15, the deadline for filing tax returns is April 18, due to Emancipation Day in the District of Columbia. April 18 is also the deadline to file an extension request, which gives you until October 17.
Q: What’s wrong with the Child Tax Credit (CTC)?
A: Pay attention to this one. When Congress passed the US Bailout Plan (ARP) in 2021, it created an enhanced child tax credit. Under the old system, families who met certain income thresholds got the credit when they filed their taxes. The amount was increased by ARP and the payment plan was changed. Eligible Americans received half of the increased amount in six monthly installments. To get the OTHER half, you must claim it on your 2021 tax returns.
If you received the CTC last year, you should have received (or will soon receive) a letter from the IRS, which details the amount of CTC payments sent to you in 2021 and provides specific instructions on how to claim the rest of the money. You can also check the amount of payments you received by using the CTC update portal on IRS.gov.
If you didn’t receive CTC payments but think you’re entitled to them based on your 2021 income and family size, you can claim the full credit on your tax return. Payments decrease as your income increases, but you would qualify for the full credit if you earned less than $150,000 married and filing jointly or $75,000 as a single filer. Some families who normally do not need to file may need to do so to apply for the CTC.
Q: What if I never received my refund or stimulus check from last year?
A: Most delays are due to IRS staffing issues. According to the Taxpayer Advocate’s 2021 report, since fiscal 2010, the agency’s headcount has decreased by 17% while its workload – measured by the number of individual returns – has increased by 19%.
If a return requires human eyes from IRS personnel (i.e., paper returns, error correction), you will experience significant delays. At the end of December, the IRS had backlogs of 6 million original unprocessed individual returns and 2.3 million unprocessed amended individual returns.
Q: How to avoid these horrible delays?
A: File electronically, use direct deposit, and make sure child credit and stimulus amounts match IRS notices. Most taxpayers should receive refunds within 21 days of their e-filing if they choose direct deposit and there are no issues with their tax return.
Q: Are stimulus checks taxable?
A: STIMULUS CHECKS ARE NOT TAXABLE. If you have not received payment or believe you have been wronged, you should apply for the salvage rebate credit. The IRS is sending separate letters to help determine if people are eligible to claim missing stimulus payments.
Q: Are unemployment benefits taxable?
A: Congress has NOT passed legislation providing tax relief on 2021 unemployment benefits like it did for 2020 unemployment benefits. So if you didn’t withhold unemployment tax , you may owe money or get a smaller refund. Form 1099-G highlights the amount of unemployment you received. Additionally, you may also be liable for state taxes on your unemployment benefits.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at [email protected] Check out his website at www.jillonmoney.com.