04/05/22

Options for taxpayers who need help paying their tax bill

Taxpayers who can’t pay the full amount of federal taxes they owe should file their tax return on time and pay as much as possible. This will help reduce penalties and interest. If they can’t pay their full bill, they have some other options.

Get a loan
In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law. Normally, the late-payment penalty is 0.5% per month, not to exceed 25% of unpaid taxes. The interest rate, adjusted quarterly, is currently 4% per year, compounded daily.
If a taxpayer can’t get a loan, the IRS offers other options.

Online payment plans
Most individual taxpayers qualify to set up an online payment plan with the IRS, and it only takes a few minutes to apply. Applicants are notified immediately if their request is approved. There is no need for them to contact the IRS for a payment plan or an installment agreement. The agency generally processes online payment plans quicker than requests made with electronically filed tax returns. If a taxpayer just filed their return and they know they’ll owe a balance, they may be able to set up a payment plan online before they even receive a notice or bill.

There are two main types of online payment plans:

  • Short-term payment plan – The payment period is 180 days or less and the total amount owed is less than $100,000 in combined tax, penalties, and interest. There’s no fee for setting one up, though interest and the late-payment penalty continue to accrue.
  • Long-term payment plan – Payments are monthly, and the amount owed must be less than $50,000 in combined tax, penalties, and interest. If the IRS approves a long-term payment plan, also known as an installment agreement, a setup fee normally applies. Low-income taxpayers may qualify to have the fee waived or reimbursed. In addition, for anyone who filed their return on time, the late-payment penalty rate is reduced while an installment agreement is in effect. The late payment penalty accrues at the rate of 0.25% per month, instead of up to 1% per month.

Taxpayers who do not qualify for an online payment agreement may still be able to pay in installments. Taxpayers should review the Additional Information on Payment Plans page of IRS.gov for details.

Delayed collection
If the IRS determines a taxpayer is unable to pay, it may delay collection until their financial condition improves. However, the total amount owed will still increase because penalties and interest continue to accrue until the taxpayer pays in full. Taxpayers can request a delay by calling the phone number on their notice or 800-829-1040.

Penalty relief
Some taxpayers qualify to have their late-filing or late-payment penalties reduced or eliminated. This is done on a case-by-case basis, based on reasonable cause. Alternatively, where a taxpayer has a history of compliance, the IRS can typically provide relief under the First Time Abatement program. Taxpayers should review the Penalty Relief page of IRS.gov for more information.

Offer in Compromise
Some taxpayers qualify to settle their tax bill for less than the full amount due, through an Offer in Compromise. There is a $205 non-refundable OIC application fee; however, it is generally waived for individual low-income taxpayers. Offers require a partial payment of the offer amount except for offers filed based on doubt as to liability. The Offer in Compromise Pre-Qualifier tool can help determine eligibility for individuals interested in applying.

03/31/22

IRS reminds holders of foreign bank and financial accounts of April FBAR deadline

WASHINGTON – The Internal Revenue Service today reminded U.S. citizens, resident aliens and any domestic legal entity that the deadline to file their annual Report of Foreign Bank and Financial Accounts (FBAR) is April 15. For additional information about filing deadlines, filers should look to Financial Crimes Enforcement Network’s (FinCEN) website for further information.

Filers missing the April deadlines will receive an automatic extension until Oct. 15, 2022, to file the FBAR. They don’t need to request the extension. See FinCEN’s website for further information.

Who must file an FBAR
The Bank Secrecy Act requires U.S. persons to file an FBAR if they have:

  1. Financial interest in, signature authority or other authority over one or more accounts, such as a bank account, brokerage account, mutual fund or other financial account in a foreign country, and
  2. The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

Because of this threshold, the IRS encourages U.S. persons or entities with foreign accounts, even relatively small ones, to check if this filing requirement applies to them.

A U.S. person is a citizen or resident of the United States or any domestic legal entity such as a partnership, corporation, limited liability company, estate or trust.

The FBAR must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) and is only available through the BSA E-Filing System website. Taxpayers who are unable to e-file their FBAR must contact FinCEN at 800-949-2732 (703-905-3975 if calling from outside the U.S.) or FRC@fincen.gov.

Penalties for failure to file an FBAR
Those who don’t file an FBAR when required may be subject to significant civil and criminal penalties that can result in a fine and/or prison. The IRS will not penalize those who properly reported a foreign account on a late-filed FBAR if the IRS determines there was reasonable cause for late filing.

03/30/22

Debunking myths about federal tax refunds

Once taxpayers file their federal tax returns, they’re eager for details about their refund. When it comes to refunds, there are several common myths that can mislead taxpayers.

Myth: Calling the IRS, tax software provider, or a tax professional will provide a more accurate refund date
Many people think talking to the IRS, tax software provider or their tax professional is the best way to find out when they will get their refund. The best way to check the status of a refund is online through the Where’s My Refund? tool or the IRS2Go app.

Taxpayers can call the automated refund hotline at 800-829-1954. This hotline has the same information as Where’s My Refund? and IRS telephone assistors. There is no need to call the IRS unless Where’s My Refund? says to do so.

Myth: Ordering a tax transcript is a secret way to get a refund date
Doing so will not help taxpayers find out when they will get their refund. Where’s My Refund? tells the taxpayer their tax return has been received and if the IRS has approved or sent the refund.

Myth: Where’s My Refund? must be wrong because there’s no deposit date yet
Updates to Where’s My Refund? ‎on both IRS.gov and the IRS2Go mobile app are made once a day, usually overnight. Even though the IRS issues most refunds within 21 days, it’s possible a refund may take longer. If the IRS needs more information to process a tax return, the agency will contact the taxpayer by mail. Taxpayers should also consider the time it takes for the banks to post the refund to the taxpayer’s account. People waiting for a refund in the mail should plan for the time it takes a check to arrive.

Myth: Where’s My Refund? must be wrong because a refund amount is less than expected
There are several factors that could cause a tax refund to be less than expected. The IRS will mail the taxpayer a letter of explanation if these adjustments are made. Some taxpayers may also receive a letter from the Department of Treasury’s Bureau of the Fiscal Service if their refund was reduced to offset certain financial obligations. Before calling, check Where’s My Refund or wait for the letter to understand why the change was made. This can help taxpayers know how to respond, if necessary.

Myth: Getting a refund this year means there’s no need to adjust withholding for 2022
To help avoid a surprise next year, taxpayers should make changes now to prepare for next year. One way to do this is to adjust their tax withholding with their employer. The Tax Withholding Estimator tool can help taxpayers determine if their employer is withholding the right amount. Taxpayers who experience a life event like marriage, divorce, birth of a child, an adoption or are no longer able to claim a person as a dependent are encouraged to check their withholding. Taxpayers can use the results from the Tax Withholding Estimator to complete and submit a new Form W-4, Employee’s Withholding Certificate, to their employer as soon as possible. Withholding takes place throughout the year, so it’s better to take this step as soon as possible.

03/24/22

Online Account and tax transcripts can help taxpayers file a complete and accurate tax return

Filing an error-free tax return is key to taxpayers getting any refund they are due as soon as possible. One IRS resource that can help is Online Account. This is the fastest and easiest way to see account information such as estimated tax payments, prior year adjusted gross income and economic impact payment amounts.

Taxpayers can also request a tax transcript. There are five types of transcripts. Taxpayers should review each transcript type to determine which one best meets their needs. IRS transcripts are also a good way to check for fraudulent activity. However, ordering a transcript will not help them find out when they will get their refund. Where’s My Refund? provides the most up-to-date details about whether a tax return has been received and if the IRS has approved or sent the refund.

To protect taxpayers’ identities, the transcripts partially hide personally identifiable information such as names, addresses and Social Security numbers. All financial entries are fully visible.

There are three ways taxpayers can get transcripts:

Online. People can view their tax records in their Online Account. From there, they can visit Get Transcript Online to view, print, or download all transcript types.

By mail. Taxpayers can use Get Transcript by Mail to get a tax return or tax account transcript delivered within 5-10 calendar days. They can also submit Form 4506-T to request any transcript type. Most Form 4506-T transcript requests are processed within 10 business days and then mailed. Form 4506-T is available on the Forms, Instructions and Publications page on IRS.gov.

By phone. Taxpayers can call the IRS’s automated phone transcript service at 800-908-9946 to get a tax return or tax account transcript delivered by mail within 5-10 calendar days.

All transcripts are provided free of charge.

03/10/22

Two tax credits that can help cover the cost of higher education

Higher education is important to many people and it’s often expensive. Whether it’s specialized job training or an advanced degree, there are a lot of costs associated with higher education. There are two education tax credits designed to help offset these costs – the American opportunity tax credit and the lifetime learning credit.

Taxpayers who paid for higher education in 2021 can see these tax savings when they file their tax return. If taxpayers, their spouses, or their dependents take post-high school coursework, they may be eligible for a tax benefit. To claim either credit, taxpayers complete Form 8863, Education Credits, and file it with their tax return.

These credits reduce the amount of tax someone owes. If the credit reduces tax to less than zero, the taxpayer could even receive a refund. To be eligible to claim either of these credits, a taxpayer or a dependent must have received a Form 1098-T from an eligible educational institution. There are exceptions for some students.

Here are some key things taxpayers should know about each of these credits.

The American opportunity tax credit is:

  • Worth a maximum benefit of up to $2,500 per eligible student.
  • Only available for the first four years at an eligible college or vocational school.
  • For students pursuing a degree or other recognized education credential.
  • Partially refundable. People could get up to $1,000 back.

The lifetime learning credit is:

  • Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify.
  • Available for all years of postsecondary education and for courses to acquire or improve job skills.
  • Available for an unlimited number of tax years.

02/17/22

Taxpayers can start the 2022 tax year off right by checking their withholding

One way people can get the new tax year off to a good start is by checking their federal income tax withholding. They can do this using the Tax Withholding Estimator on IRS.gov.

This online tool helps employees avoid having too much or too little tax withheld from their wages. It also helps self-employed people, who have wage income, estimate tax payments that they should make to avoid unexpected results at tax time. Having too little withheld can result in a tax bill or even a penalty at tax time. Having too much withheld results in less money in their pocket. The estimator can help them get to a balance of zero or a desired refund amount.

Taxpayers can use the results from the Tax Withholding Estimator to determine if they should:

The Tax Withholding Estimator asks taxpayers to estimate:

  • Their 2022 income.
  • The number of children they will claim for the child tax credit and earned income tax credit.
  • Other items that will affect their 2022 tax return when they file in 2023.

The Tax Withholding Estimator does not ask for personally identifiable information, such as a name, Social Security number, address, and bank account numbers. The IRS doesn’t save or record the information entered in the Estimator.

Before using the Estimator, it can be helpful for taxpayers to gather applicable income documents including:

These documents are not needed to use the estimator but having them handy will help taxpayers estimate 2022 income and answer other questions asked during the process.

The Tax Withholding Estimator results will only be as accurate as the information entered by the taxpayer. People with only pension income should not use the Estimator. Those with wage income can account for current or future pension income. People with more complex tax situations should use the instructions in Publication 505, Tax Withholding and Estimated Tax. This includes taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends.

02/09/22

IRS reminds taxpayers their Social Security benefits may be taxable

A new tax season has arrived. The IRS reminds taxpayers receiving Social Security benefits that they may have to pay federal income tax on a portion of those benefits.

Social Security benefits include monthly retirement, survivor and disability benefits. They don’t include supplemental security income payments, which aren’t taxable.

The portion of benefits that are taxable depends on the taxpayer’s income and filing status.

To determine if their benefits are taxable, taxpayers should take half of the Social Security money they collected during the year and add it to their other income. Other income includes pensions, wages, interest, dividends and capital gains.

  • If they are single and that total comes to more than $25,000, then part of their Social Security benefits may be taxable.
  • If they are married filing jointly, they should take half of their Social Security, plus half of their spouse’s Social Security, and add that to all their combined income. If that total is more than $32,000, then part of their Social Security may be taxable.

Fifty percent of a taxpayer’s benefits may be taxable if they are:

  • Filing single, head of household or qualifying widow or widower with $25,000 to $34,000 income.
  • Married filing separately and lived apart from their spouse for all of 2020 with $25,000 to $34,000 income.
  • Married filing jointly with $32,000 to $44,000 income.

Up to 85% of a taxpayer’s benefits may be taxable if they are:

  • Filing single, head of household or qualifying widow or widower with more than $34,000 income.
  • Married filing jointly with more than $44,000 income.
  • Married filing separately and lived apart from their spouse for all of 2021 with more than $34,000 income.
  • Married filing separately and lived with their spouse at any time during 2021.

02/08/22

IRS updates Frequently Asked Questions and Answers for 2021 Recovery Rebate Credit

WASHINGTON — The Internal Revenue Service today updated frequently asked questions (FAQs) for the 2021 Recovery Rebate Credit.

These FAQs (FS-2022-09) updated:

2021 Recovery Rebate Credit — Topic A: General Information: Q3
2021 Recovery Rebate Credit — Topic D: Claiming the 2021 Recovery Rebate Credit: Q1, Q2,Q6
2021 Recovery Rebate Credit — Topic F: Receiving the Credit on a 2021 Tax Return, Q8, Q9
2021 Recovery Rebate Credit — Topic G: Finding the Third Economic Impact Payment Amount to Calculate the 2021 Recovery Rebate Credit: Q2

Individuals who did not qualify for, or did not receive, the full amount of the third Economic Impact Payment may be eligible to claim the 2021 Recovery Rebate Credit based on their 2021 tax year information.  Individuals may have received their third Economic Impact Payment through initial and “plus-up” payments in 2021.

Note:  Third Economic Impact Payments are different than the monthly advance Child Tax Credit payments that the IRS disbursed from July through December 2021.

Most eligible people already received their Economic Impact Payments and won’t include any information about their payment when they file. However, people who are missing stimulus payments should review the information on the Recovery Rebate Credit page to determine their eligibility and whether they need to claim a Recovery Rebate Credit for tax year 2021.

To claim any remaining credit for 2021, eligible people must file a 2021 tax return, even if they usually do not file taxes.  Also, people who did not receive all of their first and second Economic Impact Payments in 2020 can receive those amounts only by filing a 2020 tax return (or amending a previously filed return) and claiming the 2020 Recovery Rebate Credit.  They should review the Recovery Rebate Credit page to determine their eligibility.

The 2021 Recovery Rebate Credit can reduce any taxes owed or be included in the tax refund for the 2021 tax year. Filers must ensure to not mix information from their 2020 and 2021 tax years. In particular, filers should take care to NOT include any information regarding the first and second Economic Impact Payments received in 2020, or the 2020 Recovery Rebate Credit, on their 2021 return. They will need the total of the third payment received to accurately calculate the 2021 Recovery Rebate Credit when they file their 2021 federal tax return in 2022. 

Individuals can now view this information in their online account.

People can also locate this information on Letter 1444-C, which they received from the IRS during 2021 after each payment, as well as Letter 6475, which the IRS will mail to them  through March 2022. 

The FAQ’s cover most questions relating to claiming the credit and are for use by taxpayers and tax professionals and are being issued as expeditiously as possible.

File for free and use direct deposit

Taxpayers with income of $73,000 or less can file their federal tax returns electronically for free through the IRS Free File Program. The fastest way to receive a tax refund is to file electronically and have it direct deposited into a financial account. Refunds can be directly deposited into bank accounts, prepaid debit cards or mobile apps as long as a routing and account number is provided.

02/03/22

Tips to help taxpayers reduce tax-time stress

Each tax season comes with unique challenges and 2022 is no exception. The IRS wants taxpayers to get the information they need as quickly as possible. Taxpayers should keep these tips in mind when they get ready to file. Following them will help get this year’s taxes done accurately and refunds issued timely.

• Avoid errors. Taxpayers should review their tax return so they can file a complete and accurate return and avoid refund delays. Filing electronically is the most accurate way to file. Taxpayers should check all names and double check all Social Security numbers, bank account and routing numbers.

• Gather records. Good recordkeeping makes preparing a tax return easier. It can also ensure taxpayers do not overlook deductions and credits.
 
• Start with IRS.gov. IRS.gov is available around-the-clock and it’s the fastest way to get assistance. Millions of people use IRS.gov for filing and paying taxes, getting information about their accounts or answers to tax questions. The IRS Services Guide outlines the many ways taxpayers can get help from the IRS.
 
• Use online tools. IRS.gov has many useful online tools. The Interactive Tax Assistant provides answers to many tax questions specific to an individual’s circumstances. It gives the same answers that an IRS representative would give over the phone.
 
• Report all income. Taxpayers must report their taxable income from all sources, including the gig economy, Forms W-2, Wage and Tax Statements, and Forms 1099. Other income may be taxable, even if the taxpayer does not receive a statement.

• Report unemployment benefits. Taxpayers who received unemployment benefits in 2021, must report the amount as taxable income on their tax return.

• Access online account or review IRS letters. This year, people must have the total amounts of their advance child tax credit payments and their Economic Impact Payments on hand when filing. They can check online account or review Letter 6419, 2021 Total Advance Child Tax Credit Payments, and Letter 6475, Your 2021 Economic Impact Payment, for their total payment amounts to help them file an accurate return.

• Choose a reputable preparer. Taxpayers can self-prepare or use a tax preparer. IRS.gov has resources to help people choose a tax pro. The IRS Directory of Federal Tax Return Preparers provides information on who has a professional credential or participates in the IRS Annual Filing Season Program.

• File electronically. IRS Free File online can help taxpayers claim their earned income tax credit, child and dependent care credit, child tax credit and recovery rebate credit. Some Free File options are available in Spanish. MilTax online software is available for members of the military and certain veterans, regardless of income, and is offered through the Department of Defense. Eligible taxpayers may prepare and file their federal returns and up to three state returns for free.

• Choose direct deposit. Filing electronically and choosing direct deposit is the safest and easiest way to file an accurate tax return and the fastest way to get a refund.

01/31/22

IRS issues 2021 Filing Season frequently asked questions, information to help taxpayers preparing their 2021 returns

These frequently asked questions (FAQs) are released to the public in Fact Sheet 2022-06 PDF, January 31, 2022.

The American Rescue Plan Act (ARPA) of 2021 expanded the Child Tax Credit (CTC) for tax year 2021 only. These Child Tax Credit FAQs focus on information helpful to taxpayers preparing their tax year 2021 tax returns.

Recipients of advance Child Tax Credit payments will need to compare the amount of payments received during 2021 with the amount of the Child Tax Credit that can be claimed on their 2021 tax return.

Those that received less than the amount they are eligible for can claim a credit for the remaining amount. Those that received more than they are eligible for may need to repay some or all of the excess amount.

The IRS has sent Letter 6419 in January of 2022 to provide the total amount of advance Child Tax Credit payments that were received in 2021. The IRS urges taxpayers receiving these letters to make sure they hold onto them to assist them in preparing their 2021 federal tax returns in 2022.

These FAQs contain the following topics:

  • Topic A: 2021 Child Tax Credit Basics
  • Topic B: Eligibility Rules for Claiming the 2021 Child Tax Credit on a 2021 Tax Return
  • Topic C: Reconciling Advance Child Tax Credit Payments and Claiming the 2021 Child Tax Credit on Your 2021 Tax Return
  • Topic D: Claiming the 2021 Child Tax Credit If You Don’t Normally File a Tax Return
  • Topic E: Commonly Asked Immigration-Related Questions

01/25/22

How a taxpayer’s filing status affects their tax return


A taxpayer’s filing status tells the IRS about them and their tax situation. This is just one reason taxpayers should familiarize themselves with each option and know their correct filing status. The IRS Interactive Tax Assistant can help them determine their filing status.

A taxpayer’s filing status typically depends on whether they are considered unmarried or married on Dec. 31, which determines their filing status for that entire year.

More than one filing status may apply in certain situations. If this is the case, taxpayers can usually choose the filing status that allows them to owe the least amount of tax.

When preparing and filing a tax return, filing status determines:

  • If the taxpayer is required to file a federal tax return
  • If they should file a return to receive a refund
  • Their standard deduction amount
  • If they can claim certain tax credits
  • The amount of tax they owe

Here are the five filing statuses:

  • Single. Normally, this status is for taxpayers who are unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law.  
  • Married filing jointly. If a taxpayer is married, they can file a joint tax return with their spouse. If one spouse died in 2021, the surviving spouse can use married filing jointly as their filing status for 2021 if they otherwise qualify to use that status. 
  • Married filing separately. Married couples can choose to file separate tax returns. This may benefit taxpayers who want to be responsible only for their own tax or if it results in less tax than filing a joint return. 
  • Head of household. Unmarried taxpayers may be able to file using this status, but special rules apply. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person living in the home for half the year.
  • Qualifying widow or widower with dependent child. This status may apply to a taxpayer filing a 2021 tax return if their spouse died in 2019 or 2020, and they didn’t remarry before the end of 2021 and have a dependent child. Other conditions also apply.

01/24/22

An overview of the credit for other dependents


Taxpayers with dependents who don’t qualify for the child tax credit may be able to claim the credit for other dependents. This is a non-refundable credit. It can reduce or, in some cases, eliminate a tax bill but, the IRS cannot refund the taxpayer any portion of the credit that may be left over.

Here’s more information to help taxpayers determine if they’re eligible to claim it on their 2021 tax return.

The maximum credit amount is $500 for each dependent who meets certain conditions. These include:

  • Dependents who are age 17 or older.
  • Dependents who have individual taxpayer identification numbers.
  • Dependent parents or other qualifying relatives supported by the taxpayer.
  • Dependents living with the taxpayer who aren’t related to the taxpayer.

The credit begins to phase out when the taxpayer’s income is more than $200,000. This phaseout begins for married couples filing a joint tax return at $400,000.

A taxpayer can claim this credit if:

  • They claim the person as a dependent on the taxpayer’s return.
  • They cannot use the dependent to claim the child tax credit or additional child tax credit.
  • The dependent is a U.S. citizen, national or resident alien.

01/20/22

Top 5 things to remember when filing income tax returns in 2022

WASHINGTON — With filing season beginning January 24, the Internal Revenue Service reminded taxpayers about several key items to keep in mind when filing their federal income tax returns this year.

Given the unprecedented circumstances around the pandemic and unique challenges for this tax season, the IRS offers a 5-point checklist that can help many people speed tax return processing and refund delivery while avoiding delays.

1. File an accurate return and use e-file and direct deposit to avoid delays. Taxpayers should electronically file and choose direct deposit as soon as they have everything they need to file an accurate return. Taxpayers have many choices, including using a trusted tax professional. For those using e-file, the software helps individuals avoid mistakes by doing the math. It guides people through each section of their tax return using a question-and-answer format.

2. For an accurate return, collect all documents before preparing a tax return; make sure stimulus payment and advance Child Tax Credit information is accurate. In addition to collecting W-2s, Form 1099s and other income-related statements, it is important people have their advance Child Tax Credit and Economic Impact Payment information on hand when filing.

Advance CTC letter 6419: In late December 2021, and continuing into January, the IRS started sending letters to people who received advance CTC payments. The letter says, “2021 Total Advance Child Tax Credit (AdvCTC) Payments” near the top and, “Letter 6419” on the bottom righthand side of the page.  Here’s what people need to know:

  • The letter contains important information that can help ensure the tax return is accurate.
  • People who received advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.
  • Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.

Third Economic Impact Payment letter 6475: In late January 2022, the IRS will begin issuing letters to people who received a third payment in late January 2021. The letter says, “Your Third Economic Impact Payment” near the top and, “Letter 6475” on the bottom righthand side of the page. Here’s what people need to know:

  • Most eligible people already received their stimulus payments. This letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit (RRC) for missing stimulus payments.
  • People who are eligible for RRC must file a 2021 tax return to claim their remaining stimulus amount.
  • People can also use IRS online account to view their Economic Impact Payment amounts.

Both letters – 6419 and 6475 – include important information that can help people file an accurate 2021 tax return. If a return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. Using this information when preparing a tax return electronically can reduce errors and avoid delays in processing.

3. Avoid lengthy phone delays; use online resources before calling the IRS. Phone demand on IRS assistance lines remains at record highs. To avoid lengthy delays, the IRS urges people to use IRS.gov to get answers to tax questions, check a refund status or pay taxes. There’s no wait time or appointment needed — online tools and resources are available 24 hours a day.

Additionally, the IRS has several ways for taxpayers to stay up to date on important tax information:

4. Waiting on a 2020 tax return to be processed? Special tip to help with e-filing a 2021 tax return: In order to validate and successfully submit an electronically filed tax return to the IRS, taxpayers need their Adjusted Gross Income, or AGI, from their most recent tax return. For those waiting on their 2020 tax return to be processed, here’s a special tip to ensure the tax return is accepted by the IRS for processing. Make sure to enter $0 (zero dollars) for last year’s AGI on the 2021 tax return. For those who used a Non-Filer tool in 2021 to register for an advance Child Tax Credit or third Economic Impact Payment in 2021, they should enter $1 as their prior year AGI. Everyone else should enter their prior year’s AGI from last year’s return. Remember, if using the same tax preparation software as last year, this field will auto-populate.

5. Free resources are available to help taxpayers file. During this challenging year, the IRS reminds taxpayers there are many options for free help, including many resources on IRS.gov. For those looking to avoid the delays with a paper tax return, IRS Free File is an option. With Free File, leading tax software providers make their online products available for free as part of a 20-year partnership with the Internal Revenue Service. This year, there are eight products in English and two in Spanish. IRS Free File is available to any person or family who earned $73,000 or less in 2021. Qualified taxpayers can also find free one-on-one tax preparation help around the nation through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs.

01/06/22

Tax filing step 1: Gather all year-end income documents

As taxpayers are getting ready to file their taxes, the first thing they should do is gather their records. To avoid processing delays that may slow their refund, taxpayers should gather all year-end income documents before filing a 2021 tax return.

It’s important for people to have all the necessary documents before starting to prepare their return. This helps them file a complete and accurate tax return. Here are some things taxpayers need to have before they begin doing their taxes.

• Social Security numbers of everyone listed on the tax return. Many taxpayers have these numbers memorized. Still, it’s a good idea to have them on hand to double check that the numbers on the tax return are correct. An SSN with one number wrong or two numbers switched will cause processing delays.
 
• Bank account and routing numbers. People will need these for direct deposit refunds. Direct deposit is the fastest way for taxpayers to get their money and avoids a check getting lost, stolen or returned to IRS as undeliverable.

• Don’t have a bank account? Learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool. Veterans can access the Veterans Benefits Banking Program.

• Forms W-2 from employer(s).

• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.

• Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.

• Form 1099-INT for interest received.

• Other income documents and records of virtual currency transactions.

• Forms 1095-A, Health Insurance Marketplace Statement. Taxpayers will need this form to reconcile advance payments or claim the premium tax credit.

• Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.

• Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit.