Tips for the 2022 Tax Filing Season

The Internal Revenue Service announced that the nation’s 2022 tax filing season will start on Monday, Jan. 24, 2022, when the tax agency will begin accepting and processing 2021 tax year returns.  The IRS encourages everyone to have all the information they need in hand to make sure they file a complete and accurate return. Having an accurate tax return can avoid processing delays, refund delays and later IRS notices. 

As the individual tax filing season approaches, we have compiled some tips that may help the preparer get ready for the upcoming season.  t’s never too early to get ready for the 2022 tax filing season ahead

Check the “What’s New” Section of the 1040 instructions as well as any related schedules you are filing.

As of the date of writing, there are 19 “What’s New” items discussed in the 1040 instructions.  Some of the most important changes include:

Filing deadline – Due to the  Emancipation Day holiday in the District of Columbia the filing deadline for the 2021 returns is April 18, 2022 – even if the taxpayer does not live in the District of Columbia.   If the taxpayer lives in Maine or Massachusetts, they will have until April 19, 2022, because of the Patriots’ Day holiday in those states.

Tuition and fees deduction not available – The tuition and fees deduction is not available after 2020. Instead, the income limitations for the lifetime learning credit have been increased.

Standard deduction amount increased. For 2021, the standard deduction amount has been increased for all filers. The amounts are:

• Single or Married filing separately—$12,550 (2022 – $12,950)
• Married filing jointly or Qualifying widow(er)—$25,100 (2022 – $25,900)
• Head of household—$18,800 (2022 – $19,400)

All taxpayers now eligible for Identity Protection PIN. Beginning in 2021, the IRS Identity Protection PIN (IP PIN) Opt-In Program has been expanded to all taxpayers who can properly verify their identity. An IP PIN helps prevent your social security number from being used to file a fraudulent federal income tax return.  For more information, see our recent blog post – Identity Protection Pin.

Expanded dependent care assistance. The American Rescue Plan Act of 2021 (ARP) expanded the child and dependent care tax credit for 2021 by making it refundable for certain taxpayers and making it larger. For 2021, the dollar limit on qualifying expenses increases to $8,000 for one qualifying person and $16,000 for two or more qualifying persons. The rules for calculating the credit have also changed; the percentage of qualifying expenses eligible for the credit has increased, along with the income limit at which the credit begins to be phased out. Additionally, for taxpayers who receive dependent care benefits from their employer, the dollar limit of the exclusion amount increases for 2021.

Child tax credit. Under ARP, the child tax credit has been enhanced for 2021. The child tax credit has been extended to qualifying children under age 18. Depending on modified adjusted gross income, an individual may receive an enhanced credit amount of up to $3,600 for a qualifying child under age 6 and up to $3,000 for a qualifying child over age 5 and under age 18. The enhanced credit amount begins to phase out where modified adjusted gross income exceeds $150,000 in the case of a joint return or surviving spouse, $112,500 in the case of a head of household, and $75,000 in all other cases.

If the taxpayer (or spouse if filing jointly) lived in the United States for more than half the year, the child tax credit will be fully refundable even if he/she have earned income. If the individual does not meet this residency requirement, the child tax credit will be a combination of a nonrefundable child tax credit and a refundable additional child tax credit, as was the case in 2020. The credit for other dependents has not been enhanced and is figured as it was in 2020.

Virtual currency. If, in 2021, the taxpayer engaged in a transaction involving virtual currency, you will need to answer “Yes” to the question on page 1 of Form 1040 or 1040-SR. Do not leave this field blank. The question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving virtual currency.

Changes to the earned income credit (EIC).  For 2021, the following changes have been made to the EIC.

• Taxpayers without a qualifying child. Special rules apply if the individual is claiming the EIC without a qualifying child. In these cases, the minimum age has been lowered to age 19 except for specified students who must be at least age 24 at the end of the year. However, the applicable minimum age is lowered further for former foster youth and qualified homeless youth to age 18. Additionally, you no longer need to be under age 65 to claim the EIC without a qualifying child.
• Taxpayers with a qualifying child. If the taxpayer is claiming the EIC with a qualifying child, you should follow the rules that apply to filers with a qualifying child or children when determining whether your client is eligible to claim the EIC even if the qualifying child hasn’t been issued a valid SSN on or before the due date of the return (including extensions). However, when determining the amount of EIC that the individual is eligible to claim on the return, you should follow the rules that apply to taxpayers who do not have a qualifying child.
• Phaseout amounts increased. The amount of the credit has been increased and the phaseout income limits have been expanded.
• Rules for separated spouses. If the taxpayer is married but does not file a joint return, he or she may qualify to claim the EIC if they live with a qualifying child for more than half the year and either live apart from their spouse for the last 6 months of 2021 or are legally separated according to the laws of their state under a written separation agreement or a decree of separate maintenance and do not live in the same household as the spouse at the end 2021.
• Investment income limit increased. The amount of investment income that an individual can receive and still be eligible to claim the EIC has increased to $10,000.
• Prior year (2019) earned income. You can elect to use the  2019 earned income to figure the 2021 earned income credit if the 2019 earned income is more than the 2021 earned income.

Get your clients ready for the 2022 Tax Filing Season

Online Accounts – One of the greatest tools initiated by the IRS is the online account.  It is highly recommended that you ask your clients to create this account.  In the online account, a taxpayer can ] access the following services:

• View or create payment plans
• Make payments from a bank account or by debit/credit card
• View 5 years of payment history and any pending or scheduled payments
• Access certain tax records and transcripts
• View economic impact payment amounts
• View digital copies of certain notices from the IRS
• View Tax Pro Authorizations or authorization requests from tax professionals

Unfortunately this service is still not available to International Taxpayer Accounts or Business Accounts. 

Client Deadlines – Give your clients certain deadlines to submit their tax information.  For example, if if the client does not submit the required information by April 1, you will be unable to prepare their extension.  Consider adding this to your engagement letter.

Gather Documents – t’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.
• 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.
• Form 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.

Forms usually start arriving by mail or are available online from employers and financial institutions in January. 

Reconciling the Advanced Child Tax Credit and Recovery Rebate Credit. 

In January, the IRS will be sending letters to taxpayers showing the amount of credits paid during 2021.  Letter 6419 will show advanced child tax credit payments while the Letter 6475 will show the third round Economic Impact Payment.  If your client has lost this information, you can have them use the  Online Account to look up these amounts.

NOTE:  The IRS will not calculate and correct your entry if you enter $0 or leave Line 30 of the Form 1040 blank for the Recovery Rebate Credit. Instead, the IRS will treat your entry of $0 or blank as your decision not to claim the 2020 Recovery Rebate Credit. 

However, if an incorrect amount is entered, the IRS will calculate the credit for the taxpayer and correct the tax return.  This may delay processing of the return.   

Key filing season dates

There are several important dates taxpreparers should keep in mind for this year’s filing season:

January 14: IRS Free File opens. Taxpayers can begin filing returns through IRS Free File partners; tax returns will be transmitted to the IRS starting January 24. Tax software companies also are accepting tax filings in advance.
January 18: Due date for tax year 2021 fourth quarter estimated tax payment. 
January 24: IRS begins 2022 tax season. Individual 2021 tax returns begin being accepted and processing begins
January 28: Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.
April 18: Due date to file 2021 tax return or request extension and pay tax owed due to Emancipation Day holiday in Washington, D.C., even for those who live outside the area.
April 19: Due date to file 2021 tax return or request extension and pay tax owed for those who live in MA or ME due to Patriots’ Day holiday
October 17: Due date to file for those requesting an extension on their 2021 tax returns

Plan for 2022

Consider taking our course “What’s New for 2022”.  An important part of being a responsible tax preparer, is keeping up to date on new tax laws and updates.  This course concentrates on items affecting taxpayers during the 2022 calendar year and are important in planning for 2022 as well as  preparation of the 2022 income tax returns.

PTIN Courses International is an IRS-approved CE Provider.

We offer a quality continuing education experience for a reasonable price of $10.00 per credit hour!! Please take a look at the courses we currently have to offer by visiting our “All Courses” page. We are so excited to become a part of your professional journey.