Kicking the box by asking for a six-month extension to file your taxes – as a staggering nearly 19 million taxpayers have done this year – means many people are eyeing the October 17 deadline to file. their federal tax returns.
“Yes, we’re busy. It’s not as bad as the first round of the peak season, but we’re still very busy preparing individual statements,” said Robyn Fuller, CPA and founding partner of J&F. Advisors, a small accounting firm in Detroit.
Those filing in the coming weeks will want to make sure they have all their paperwork ready, especially for any payments they received in 2021 for the Child Advance Tax Credit. These installments are not taxable, but they are an important part of calculating your tax refund when you file a 2021 return.
You also want to know the exact amount you received for stimulus payments in 2021.
“If these amounts don’t match what the IRS has on file, it may delay the processing of their return,” Fuller said.
If you are filing now, it is better to file it electronically rather than on paper. While tax season has gone smoothly for many, some who filed paper returns before the April deadline continued to wait for tax refunds at the end of September. Others have only recently seen their money.
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In late June, the IRS finally finished processing all originally filed Form 1040 paper returns without errors that it received in 2021. This is a first-in, first-out process. Once returns received in 2021 are processed, the IRS may move to paper returns received this year.
The piling up of paper returns has been a troublesome development since the COVID-19 pandemic shutdowns rocked the system.
Why have so many people requested a tax return extension for 2022?
Every year, a group of people naturally drag their feet past April and file Form 4868 to request the automatic six-month extension. By completing this form, you get more time to file a completed tax return, not more time to pay your tax bill. You want to pay everything owed — or pay as much as you can — before the April deadline to avoid interest and penalties on what’s owed.
This year, the number of extension requests skyrocketed to record highs as some taxpayers hoped the IRS would extend the deadline. Others worried that last-minute tax changes were imminent in Congress. And many did not know how to calculate the child tax credit or the rebate credit for the recovery.
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“COVID has really changed things in terms of how people file, the pace at which they do it,” Fuller said. “It also changed the nature of tax law, as many credits became available.
Mark Steber, tax information manager at Jackson Hewitt Tax Service, said no one really has a firm answer on why so many extensions have been requested for 2022, way above even 2020 and 2021.
In typical years before the pandemic, he said, about 9 million to 10 million people would apply for an extension each year.
Nearly 11.6 million taxpayers filed Form 4868 in 2020 and about 13.56 million filed for an extension in 2021.
The IRS said its latest numbers through September 23 showed 18.95 million extension requests were filed in 2022, nearly 16.4 million of them electronically.
What happens if you miss the October 15 tax deadline?
Don’t try to miss the October 17 deadline – which is technically October 15 but moved to October 17 this year because the 15th is a Saturday.
“If you have filed an extension and do not file your return, your penalty and interest calculations are retained until the original due date of April 18,” Steber said.
At this point, the documents should be in the hands of taxpayers, including W2, 1099, K-1 for partnership investments. Check your numbers and information.
Any missing or inconsistent information on the IRS systems can cause problems, including the delay of any refunds.
Some filers feel they can get close to a certain number, say what they think they received in stimulus cash, and imagine that the IRS will correct it if necessary. But that’s not a good bet, given all the problems the IRS has faced.
Steber calls some tax problems “self-inflicted delay” when filers don’t provide accurate numbers or information.
The IRS noted that taxpayers filing now want to avoid errors when claiming the earned income tax credit, child care and dependent care credit, tax credit for children and the recovery refund credit.
“In 2022, the message is clear – you have to be specific,” Steber said. “There are no simple tax returns in the pandemic.”