As we near the end of 2021, you can finally breathe a sigh of relief. 2020 feels like it was ages ago. It was way too stressful for most people. And 2021 wasn’t too much better.
But across the world, we are looking forward to a brighter future. And in many ways, that future can finally begin in the new year. Of course, a new year means that tax season is about to be upon us as well.
While many people claim that tax season is hectic, it’s because they go into it unprepared. You can actually make it super easy and stress-free by preparing for tax season ahead of time.
That means that before the end of the year, you start getting your stuff in order so that when filing opens up, you are ready to go. Wondering how to prepare for tax season? The answers lie below.
When Is Tax Season?
For starters, you need to know when tax season 2022 even starts, right? When the IRS releases the tax forms for the upcoming season, you’ll be able to start filling them out.
While you’ll be able to do this at any time, you usually can’t submit and files your taxes with the IRS until late January or early February. And the deadline for filing your taxes in 2022 is April 15. Do your best to have your return file in February or March, however, to avoid any last-minute complications.
DIY or Hire a Tax Service
As you are preparing for tax season, you’ll want to decide if you are going to file your taxes yourself, or if you want to hire a tax service. Obviously, filing yourself saves money upfront. But you never know if you are doing it properly.
And if you leave out important information, you may be losing out on money that you would otherwise receive.
A tax service costs money upfront but makes the process of filing much easier. They can ensure you get the most amount of money back from the government and is almost always worth the expense. This is especially true for anyone with a non-normal work or financial situation.
If you plan to hire a service, research your options ahead of time. Compare pricing. And when you find the person or team you want to hire, contact them before tax season, so they can tell you everything they are going to need. Then, when it’s time to file, it will be quick and painless.
Factors that Could Complicate Tax Filing
Filing tax returns for the 2020 year was a nightmare for many people. So many complications made the process difficult for millions of people. From losing jobs to collecting unemployment, to switching to remote work and many other factors, it was a difficult filing season.
While the 2021 tax year won’t be as crazy, there are still a lot of factors that make this a less-than-normal tax year.
Stimulus payments were received in early 2021. But they aren’t considered taxable income. The problem is that many people list it as income, pay taxes on it, and later on, need to request a refund. Don’t be that person.
Many people also had to collect unemployment in 2021 as they were still looking for work.
And those that have switched to remote work may have the opportunity to itemize things on their taxes since many of their home resources are now used for work purposes.
And many families began receiving advanced payments of their child tax credits, which will also need to be accounted for when filing their next return.
Tax Season Preparation
So what can you do now to start preparing for an easy filing? First off, make a list.
You want to list out everything that has happened to you financially this year. You can create a free spreadsheet online, or just use a notebook and pencil.
If you received a stimulus payment, write down how much you received and when. If you received any unemployment, write that down.
If you started a new job, track those details. And if you switched to remote work, note when that took place. If you received any advanced tax credits, keep track of the amounts and how many payments you received.
Sold your house? Welcomed in a new paying roommate?
All of this information will make it much easier when your accountant asks you all of these questions.
Also, be sure to keep a physical folder where you can store any tax documents that you receive. Having everything in one place is key for successful tax filing. If you are missing documents, you’ll have to request them to be sent again, which can take weeks.
Changes for the 2022 Tax Season
Are there changes to the tax rules and regulations for the upcoming tax season? There are a few.
While the tax deadline was extended for the last two years, it isn’t going to be this year. So April 15 is the last day.
As mentioned earlier, the child tax credit, which families normally receive after filing their taxes, has started receiving advanced payment of it this year. So you won’t get that big tax credit all at once this time.
The dependent care tax credits have also increased this year. If your household makes less than $125,000, the credit is now $4,000 for one child and $8,000 for two.
If you received any unemployment benefits, then the first $10,200 should be tax-exempt. And if you left a job and elected to continue paying for health insurance through the COBRA Act, you should receive a subsidy from April 1, 2021, to September 30, 2021, making these payments tax-free.
And there’s a lot going on with the government and the Fed right now. So there’s a chance that taxes could see an increase before 2021 comes to a close, which would affect the upcoming tax season.
Make Tax Season a Breeze
Tax season doesn’t have to be hard or stressful. As long as you take a little bit of time to prepare for it ahead of time, it can be a quick and painless process. Whether you file yourself or hire a specialist, with the right preparation, you’ll have no issues.
Looking for more information like this? Visit our blog now to find other helpful articles.