This article was published in Entrepreneurs Magazine.
Tax Day looks a little different in 2022. With respect to the pandemic and unprecedented events of 2021, this tax season presented changes including new tax rules, deadlines, extensions and refunds. Here’s everything you’ll want to know to minimize mistakes, maximize your refund and file your tax return successfully.
What changes were made to 2022 Tax Day?
In the wake of the pandemic, significant changes were made to tax legislation, such as increasing standard deductions, raising income tax brackets and reimplementing required minimum distributions. With several new regulations, like the recent IRS 1099 rule for PayPal and Venmo, it’s important to take note of what’s shifted to understand what may or may not affect your specific taxes and filing status.
If you received unemployment benefits or stimulus checks in 2021, be mindful and check that you were eligible or received the appropriate amount, otherwise you might have to pay a certain amount back.
When do I need to file my taxes?
If you’re expecting a refund, you should file as soon as possible. Alternatively, if you owe money, it might be wise to wait closer to the April 18 deadline. This will give you more time to organize a plan for how to pay.
Why are taxes due April 18th instead of April 15th this year?
April 18th, 2022 is the official deadline for most Americans to file their 2021 federal income taxes, as opposed to the Tax Day standard of April 15th. The 18th does not imply an extension — it reflects the fact that Emancipation Day, a federal-government-recognized holiday, falls on the 15th this year.
Do federal and state taxes have the same due date?
Although most states require residents to file their taxes by the federal tax deadline, there are certain states that uphold different due dates, as well as the nine states that don’t require a tax return at all. As a standard, a state won’t require you file your taxes before the federal deadline, so you can safely assume they can be filed on the same day. Still, be sure to check your state’s 2022 tax deadline to avoid any unnecessary stress.
Will there be an extension?
A nationwide extension has not been announced and is not likely, as there haven’t been significant disruptions that would affect tax code like there were in the past two years with the pandemic. However, the IRS announced a May 16th extension for Kentucky, Illinois, Tennessee and Colorado because of tornadoes, wildfires and winter storms.
When are taxes due if I file an extension, and how do I do it?
You can file for an extension through the IRS website, and you must do so by April 18th. You’ll then have until October 17th, 2022 to submit your 2021 income tax return. However, keep in mind that filing for an extension does not extend the due date for payment on any money you might owe to the IRS — it just gives you more time to complete and submit your tax return.
What filing options are available to file my income tax return?
You can file your taxes electronically through the IRS or a third-party site like TurboTax. Completing your taxes electronically allows for an overall faster filing process, and you’ll receive your refund more quickly. You’ll also be able to request a direct deposit if you’re expecting a refund. You can go the traditional route if you have your documents together and prefer to mail them in, though this does extend the processing time.
What forms do I have to fill out?
There are three options when it comes to filing your federal income tax return: 1040, 1040EZ, and 1040A. Although they vary in complexity, they all serve the purpose of reporting your income and determining if you owe money or are owed a return. However, it’s wise to ensure you fill out the correct form to avoid any mistakes that will cost you.
1040EZ is the shortest and simplest form, but it has the most limitations. You can only use the EZ if you are filing as single, married and filing jointly, reporting income of $100,000 or less, under the age of 65 by the end of the last tax year, among other restrictions. Also, it’s crucial to remember that you cannot claim dependents or itemize deductions when using the EZ form.
1040A is a bit more complex, but it allows for more adjustments, filing as head of household and claiming dependents. However, like the 1040EZ, you cannot itemize deductions and therefore have to claim the standard deduction.
1040 is the longest and most complex form, but it offers optimal flexibility and can be used by anyone, whereas the 1040EZ and 1040A cannot. However, if you make more than $100,000 a year in taxable income, you must use the 1040 and do not qualify for 1040A or 1040EZ.
If you’re still unsure, you can do a quick quiz on the IRS website, which will help you determine what form you need to complete and any other information you might need to file correctly and on time.
How do I determine what tax bracket I’m in?
Your tax bracket is contingent on income and filing status. For the 2021 tax year, there are seven federal brackets that reflect the percentage owed of your annual taxable income: 10%, 12%, 22%, 24%, 32%, 35% or 37%.
- 10% – $0-$9,950
- 12% – $9,951-$40,525
- 22% – $40,526-$86,375
- 24% – $86,376-$164,925
- 32% – $164,926-$209,425
- 35% – $209,426-$523,600
- 37% – $523,601 or more
How do I know if I owe money?
Money owed is largely correlated to filing status, how many allowances claimed and dependents. Most simply: the more allowances you claim on your W-4 form, the less is withheld from your paycheck, but the more you’ll owe when tax season rolls around.
If you’re unsure, don’t remember or want to be prepared, there are a few ways to find your tax information to avoid any surprises on Tax Day.
- You can view the details of your federal tax status, payment history and current balance by making an account at IRS.gov/account.
- You can call the IRS at 1-800-829-1040.
- If you have them, review your previous tax returns and statements. This might also yield information you missed and an opportunity to file an amended tax return. (You have three years after the tax filing deadline to file for a possible extra return.)
What happens if I miss the tax deadline?
If you’re owed a tax refund, there will be no penalty for filing late. However, be mindful of the regulations for your state taxes, as those may vary. If you owe money to the IRS, penalties will begin to accumulate after the tax filing deadline.
For every month your tax return is late, you are charged 5% of the taxes owed, and fees can increase up to 25% after 60 days.
For every month your payment is late, the penalty is 0.5% of taxes owed, which can also increase up to 25%.
It’s always smart to file on time to avoid late penalties and plan accordingly if you’re late or owe money.
When will I get my refund back, and what should I use it for?
If you file your taxes on time and electronically, the IRS reports that you’ll likely get your refund within 21 days. Even if you filed your taxes early, you still won’t receive your funds until mid-February as a lawful safety measure to prevent fraudulent refunds.
Depending on how much you anticipate receiving, tax refunds can be used to invest, save or even kickstart your dream side business. Before getting your refund, assess your finances and think about how to wisely spend — or save — the money you’ll get back. Tax refunds can feel like a saving grace, so be mindful about where you are in relation to where you want to be, and how the funds will assist in your financial future.
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