At BeachFleischman, we aim to ensure a smooth tax filing experience. There can be obstacles to this but addressing some of the challenges is within our control. Here are some items to consider for getting ahead on filing 2021 tax returns in 2022.
Our team has noticed very slow processing by the IRS of returns not electronically filed, so it’s extremely important to minimize back and forth with the IRS wherever possible. Clearly, the agency is dealing with resource constraints and continuing challenges from the pandemic like a remote workforce.
If not already using direct deposit for refunds, taxpayers should know the IRS says this is the fastest way to receive a refund. Eight out of ten taxpayers receive their refunds using direct deposit. The IRS claims more than 90% of electronically filed returns using direct deposit have refunds issued in less than 21 days.
Keeping your records organized is helpful for your tax preparer and can minimize unnecessary back and forth with the IRS, aside from helping taxpayers make decisions that impact current cash flow. For example, if you have a new dependent in 2021, the IRS is not aware because the credit amount was most likely based upon your 2020 tax filing. It could make sense for you to go online and claim an additional child tax credit.
On the topic of the Child Tax Credit, if 2021 is a high-income year compared to 2020, the taxpayer may be phased out of the 2021 child tax credit. This payment has been advanced to taxpayers via check or direct deposit over the last few months. However, the taxpayer could end up owing monies back to the government. An organized, high-income taxpayer may choose to take an alternate path. One option is to elect out of receiving payments now so the amount being received doesn’t need to be paid back to the government upon tax filing.
Taxpayers may want to adjust their withholdings to mitigate an anticipated large refund or amount of taxes owed. Taxpayers may also want to consider estimated tax payments to the federal, state, or perhaps even local taxing authorities if there is income from self-employment, investments, or taxable social security benefits. Federal estimated tax payments can be made online with an account. The same account can retrieve the estimated tax payment history.
With virtual or cryptocurrencies gaining popularity, taxpayers should be aware that the sale or exchange of these assets generally have tax consequences. For example, if you buy a pizza with Bitcoin, the IRS views this transaction as the disposal of an asset. Therefore, the acquisition price of that Bitcoin will need to be determined so a gain or loss can be recognized for tax purposes.
Aside from the items noted above, we encourage taxpayers to clearly list and document any estimated tax payments made throughout 2021 and utilize Excel and native PDF documents whenever possible.
Last but not least, BeachFleischman has implemented TaxCaddy, a software tool that streamlines the process for clients to gather and share their tax documents with us. This secure tool serves as year-round storage for documents while alleviating the need for office visits and paper organizers.
Please complete this form below if you are interested in our tax planning or compliance services or are looking to further understand ways to streamline your tax filings.