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Tax season for 2021 income tax returns is here, and with it comes changes to income tax rules and filing deadlines. Some of the more pervasive changes are deductions for charitable contributions for non-itemizers, advanced child tax credits and income tax filing dates.
Individual income taxpayers who claim the standard deduction can each claim up to a $300 deduction for charitable contributions made by check, credit card or cash during 2021. In 2020, joint filers were limited to a $300 deduction in total, but that limit has been increased to $600 for 2021 joint income tax returns.
Individual income taxpayers were eligible to receive advance payments for child tax credits during 2021. These amounts will need to be reported on their 2021 income tax returns and will result in reductions of income tax refunds vs. prior years for many taxpayers. Filers should make sure they have accurate records of their advance payments so that they are reported correctly on their income tax returns so that they will not incur processing delays.
The IRS is already accepting 2021 corporate income tax returns via paper and e-filing. However, the start of the 2022 tax filing season for individual income tax returns will not be until Jan. 24. Per IRS Commissioner Charles Rettig, the IRS has about 8 million unprocessed tax returns on its campuses compared to the usual 1 million amount at this point in the year. As a result, taxpayers should again expect delays in tax return processing and refund payments for this tax season. The final date on which one can timely file an individual income tax return without extensions is Monday, April 18. Those who are unable to file by that date can request an automatic six-month extension. Tax day has moved from April 15 to April 18 this year due to Emancipation Day, a holiday recognized in Washington, D.C. The holiday falls on Saturday, April 16, and is being recognized on April 15 this year.
The IRS announced Friday that the agency was pushed to the limit last year, so refund requests, even for early filers, may be delayed again this year. Generally, taxpayers who file their returns within the first two weeks of the IRS accepting tax returns receive refunds in approximately five business days. This year, the IRS is opening tax season several weeks earlier than it did last year, so taxpayers are encouraged to file as soon as possible. The IRS commissioner stated Friday that most refunds will arrive within 21 days.
The IRS released a progress update entitled "Putting Taxpayers First" detailing how it has responded to taxpayers during the pandemic over the past year. Rettig emphasized that the IRS's resources were stretched especially thin. He wrote that the IRS is still dealing with a COVID-19 related backlog of 2019 and 2020 income tax returns and still has over 8 million of pieces of unopened mail to process. Due to IRS phone lines being overburdened, taxpayers and CPAs are finding it difficult or impossible to speak to an agent about income tax returns. Rettig acknowledged that his agency has been unable to answer an unprecedented number of telephone calls, but he did not offer any concrete ideas on how he will address this important issue.
Once taxpayers file their returns, they can track the status of their refunds at: https://www.irs.gov/refunds. Taxpayers who filed amended returns in 2019 and 2020 are continuing to find that the IRS is not even acknowledging receipt of returns mailed to them until six months after they were postmarked. The IRS will accept e-filing for some amended returns beginning on Jan. 24, so taxpayers are encouraged to e-file rather than mail amended returns when possible. The IRS website said processing of amended returns is taking 20 weeks.
Mary Feichthaler is a licensed CPA and has 25 years of experience assisting individual, corporate and nonprofit clients in all areas of taxation including income tax compliance and audits, sales tax, FIRPTA and offers in compromise. She has lived in Cape Coral since 2002. She graduated magna cum laude from Georgetown University with a degree in accounting and graduated magna cum laude from Pace University with a masters in taxation. She can be reached at mary@feichthaler tax.com or at 239-898-8522.
The information in this article is general in nature and not intended as tax advice to anyone. Individuals should consult with a licensed CPA before making any tax or investment decisions.