Stay updated on all areas of tax filings and business processes affected by COVID-19

Learn more

What the 2022 Tax Season Looks Like

The 2021 tax season is already underway! With an early start date from the Internal Revenue Service this year of January 24th, many are taking advantage of the extra time to get their returns submitted well before the April deadline.

Filing early has some benefits. However, even if you aren’t quite ready at this time, there is still plenty you can be doing now to help prepare yourself and your tax expert to make the filing process smooth this year. 

One way you can begin preparations is by understanding what is unique about this tax season. There have been some significant changes you should be aware of to make this a less stressful experience overall. Here are a few of those adjustments and ways you can prepare for filing your 2021 taxes and looking ahead to 2022.

Delays Due to Covid

Like many other aspects of our lives over the last few years, Covid will potentially make an impact on tax filings. The possible backlog is already being discussed by many tax experts, and even the IRS is warning people to prepare for possible delays in the filing and returns process.

One way to help deal with this potential issue is to file electronically and request direct deposit. By avoiding physical paperwork, you may also be able to avoid some delays with your refund. According to the IRS, someone who has no issues with their tax return can expect to receive their refund within 21 days of filing electronically with direct deposit. 

Child Tax Credit

If you were one of the many Americans who received a child-tax credit in 2021, there are some important changes to note this year. If you opted to receive the monthly payments from July through December of 2021, you will only receive half of the $3,600 in child-tax credits on your tax return.

You will also need to pay special attention to your mail in the coming weeks. The IRS is sending out letters to taxpayers who received the advanced child credit payments to officially let them know how much they received. While many may not be used to receiving important tax documents in a physical letter, IRS officials are asking everyone to be extra diligent in looking out for any paperwork that may be necessary when it comes time to file your taxes.

Taxation Changes

It isn’t just the increase of delays that has changed for the IRS over the last year. Millions of Americans have quit their jobs and started side hustles or small businesses of their own. This meant many more individuals have been receiving unemployment compensation, and they may not realize this drastically changes how their taxes will be handled. For instance, unemployment compensation is fully taxable in 2021. 

The American Rescue Plan Act of 2021 did allow an exclusion of up to $10,200, however that was only for the year 2020. Going into 2022, there could be an estimated tax payment expected if no federal tax income is withheld from unemployment payments. These sort of tax returns can also be very complex and hard to navigate without the guidance of an accounting professional.

As for business owners, many may not realize a tax perk designed to encourage businesses to keep employees on payroll ended three months early in 2021. So, any business counting on the employee retention credit may need to reevaluate their filings. 

Digital Payment Changes

Now is also a good time to be looking ahead for the 2022 tax season. For example, if you were one of the millions of people who decided to start your own business or freelance projects to earn money from home, you may want to check in on the platform where you receive your payments. In 2022 there will be changes regarding how your payment service reports your income to the IRS.

Sites like PayPal will begin asking for your tax information, such as your Tax ID or Social Security number, in order to use their services. These changes impact anyone who earns more than $600 total for the year in income that is processed through these third-party platforms. 

Prepare Now for Success 

Despite all the big and small changes being made to the tax laws for 2021, you are not alone in this. Working with a professional tax expert can relieve the burden of this daunting task and help you have peace of mind there won’t be any mistakes that cause further delays in your return, or potentially worse outcomes.

Don’t forget, the deadline to file 2021 income tax returns is Monday, April 18. There are a few exceptions you may qualify for. Be sure to reach out to the BATS Xpress team, who can help guide you through all of these changes and more to make your 2021 filing much easier and less stressful.