2021 is behind us and that means it’s time to prepare for the 2022 tax season. Many individual and joint filers will be affected one way or another due to the government Stimulus Payments and Child Tax Credit Payments that were issued last year. To help you understand these and other changes that may impact how you prepare for the 2022 tax season, we’ve put together information and tips to help guide you.
Forms to Gather for the 2022 Tax Season
Organizing your tax records is the first step in preparing for the 2022 tax season. If you don’t have all your documentation together at the time of filing, it could lead to errors and a delayed tax return. To ensure a streamlined filing process, collect the following:
- Any W-2s, 1099s, or other income statements, including those for unemployment or virtual currency
- A 1099-INT if you earned interest from any of your investment accounts
- A Form 1095-A Health Insurance Marketplace Statement
- Letter 6419, 2021 Total Advance Child Tax Credit Payments if you received advance Child Tax Credit Payments throughout the year
- Letter 6475, your 2021 Economic Impact Payment, to determine if you are eligible to claim the Recovery Rebate Credit
In addition to these official forms, collect information from any charitable giving you may have done in 2021, or documentation to support itemized deductions, if you itemize.
What to Know About Reconciling Advance Child Tax Credits
If you have children and accepted Advance Child Tax Credits throughout 2021, you will need to compare the total amount you received to the amount of the Child Tax Credit that you can properly claim on your 2021 tax return. This will inform you whether you are eligible to claim further tax credits, or if you will need to repay the excess payment when you file.
If you didn’t take Advance Child Tax Credits, you can still claim the full credit on your taxes if you are eligible. Knowing this information ahead of time will help you better prepare for the 2022 tax season.
Economic Impact Payments and the Recovery Rebate Credit
In early 2022, the IRS will send Letter 6475 that contains the total amount of Economic Impact Payments and any Plus-Up Payments you received. If you missed one or more Stimulus
Payments, or didn’t receive the full amount in 2020 or 2021, you may be eligible for a Recovery Rebate Credit on your 2021 tax return.
Other Tax Credits to Know as You Prepare for the 2022 Tax Season
If you earn money from a job, the Earned Income Tax Credit can provide money back or lessen the amount you owe in taxes for 2021. More people than ever are eligible to get this expanded credit. Keep in mind, if you received unemployment benefits in 2021, they need to be reported. However, there is a ‘Lookback’ rule that could potentially help you get a larger Earned Income Tax Credit refund if you earned more in 2019 than you did in 2021. Ask your tax preparer to explore this option.
If you pay for childcare or dependent care, you can receive a tax credit that is fully refundable for the first time. This can help offset the annual cost of care. Gather all receipts and provide documentation for the caregivers you employ to prepare for the 2022 tax season. Also keep in mind, if you pay into a Dependent Care Spending Account through your employer, it may lessen the amount of Child and Dependent Care Credit you are eligible to receive.
Tax Pro or DIY to File 2021 Taxes?
One of the biggest choices to make to prepare for the 2022 tax season is to decide whether you will file taxes yourself, or leave that task to a professional. In general, the more sources of income, dependents, and possible deductions you have, the more complicated your tax filing will be.
If you’re single with one job and no property, you likely don’t need to itemize and therefore could spend a minimal amount of money on tax software to get the job done on your own. Alternatively, if you have multiple jobs, are married and/or have dependents, own one or more properties or businesses, have bought or sold properties in 2021, and/or have interest-bearing investment accounts, it’s likely worth hiring a tax professional to sort through the mountain of paperwork and ensure your taxes are filed correctly. Not doing so could result in errors, owing more or receiving a smaller refund, and delays in completing your tax filing.
Though you have until April 15 to file, the best advice to prepare for the 2022 tax season is to get it done as soon as possible. Most of the official forms you need will arrive by the end of January or first week in February. Get organized. Purchase your tax software or make an appointment with your tax professional. Then get through the task so you can get on with your year.
And finally, if you find yourself facing an overwhelming tax bill, talk to us about how we can help you manage it. We offer low-rate personal loans and other options to help ease the financial burden of taxes. Additionally, we have Financial Wellness resources available to help you budget for any tax payment you may owe.
We’re with you all the way.
Please consult a qualified tax professional for tax advice on your specific circumstances.