Preparing to File Your 2021 Taxes? News to Know

We hope your 2022 is off to a positive start! As the year gets underway, a new tax season is upon us, and we are looking forward to helping you prepare your tax return in a timely and efficient manner. 

As the global economy faces ongoing uncertainty with the lingering pandemic and its effects, the IRS, states, and localities remain backlogged with historical proportions of unprocessed tax returns, refunds, and notice replies. We understand that these delays have complicated your tax life, and our team remains dedicated to helping you overcome these challenges as you prepare for the 2022 tax season. 

In this article, we share notable tax law changes that could affect you, as well as some tax tips and recently announced date changes for filing to keep in mind as you organize your tax information. Let’s start with the new dates:

Updated Tax Filing Deadlines 

• As federal offices are closed on April 15 for Emancipation Day (a holiday in Washington, D.C.), the IRS recently announced that the deadline to file and pay income taxes this year (or file an extension) is Monday, April 18, for most states. Maine and Massachusetts residents have until April 19 to file federal returns, since April 18 is Patriot’s Day in those two states.
• Additionally, the 2022 federal tax season began on Monday, January 24, for individual filers. The IRS is anticipating two main challenges this year: a possible resurgence of COVID-19 infections and less funding from Congress than the President’s administration requested.

New 2021 Tax Law Changes 

The IRS has created several tax law changes in 2021 that may affect you for the 2022 tax season. To follow are a few of the key changes. As always, please contact our team with any questions regarding your specific situation.

Charitable contribution deduction

For cash donations made to qualifying charities during the 2021 calendar year, you can take the standard deduction and deduct up to $300 for individuals, or up to $600 combined for joint filers.

Additionally, if you itemize for the 2021 tax year only, you can claim cash contributions made to qualifying organizations up to 100% of your adjusted gross income (AGI). However, the temporary increase of the 100% limit isn’t automatic, and you would need to opt for increased limitations by making the election on your tax return.

Advance Child Tax Credit

As we mentioned in our January News to Know, if your family received an advance Child Tax Credit (CTC) in 2021, you must have an accurate record of it to properly apply to your tax return and know whether you will owe more or receive a refund. You can expect a letter from the IRS (Form 6419, 2021 CTC) showing the total amount of payments you received. Be sure to keep this as well as any other IRS letters of payments received. Depending on the amount of your total payments, your CTC may increase or decrease the amount of your refund — or you may owe additional taxes.

Recovery rebate credit

If you received a stimulus payment in 2021 — also known as a COVID-19 relief Economic Impact Payment (EIP) — it’s important to have an accurate record of those IRS payments to properly complete your tax return. If, however, you didn’t qualify for the third economic impact payment because of your 2020 income, or you didn’t receive the full amount of $1,400 last year, you may be eligible for a recovery rebate credit, which is calculated based on your 2021 tax information.

The IRS will send Letter 6475 that shows the total amount of the third EIP payment and any plus-up payments you received. Please make sure to include it with your tax records.

Cryptocurrency

As we covered in a recent CJBS post, the 2022 tax season is the first time the IRS is starting to crack down on reporting taxable crypto activity. If you sold, exchanged, or got paid in cryptocurrency for goods and services in 2021, the IRS wants to know about it, and it needs to be included on your tax return.

“Gig work”

Whether you’re an employee or independent contractor, earnings from gig economy work (such as rideshare or work-for-hire) are taxable and must be reported to the IRS. As many of us are working differently, non-traditional jobs have become more common. Whether you work full-time, part-time, or get paid in cash, earnings from gig economy work are taxable and must be reported to the IRS.

Home office expenses

Due to the pandemic, many of you have continued working remotely. If you’re self-employed or work as an independent contractor, you can deduct a portion of your home if you use it exclusively for doing business on a regular basis. It’s important to maintain records of eligible expenses and the square footage of your workspace to provide to your CJBS tax advisor so we can calculate your deduction for this expense. 

Adjustments for inflation & cost of living

The IRS has made several cost of living updates for the 2022 filing season to account for inflation. Just a few of these include:

• Increasing mileage rates for those using an automobile for business, charitable, medical, and/or moving expenses; 
• A higher basic exclusion amount for estates of decedents ($12,060,000, up from a total of $11,700,000 in 2021); and 
• An increased limit on 401(k), 403(b), most 457 plans, as well as the federal government’s Thrift Savings Plan.

Based on these recent tax law changes, your situation might be different this year than last year. Knowing what documentation you need is key to filing correctly and optimizing your tax return.

To continue to support you, we have implemented a helpful resource page on our CJBS website with valuable tools that allow you to view your estimated taxes, make tax payments, and check your refund status, to name a few. You can also find tables showing the additional cost of living changes, if you’re interested in learning more.

Finally, as a reminder, and considering the amount of paper backlog the IRS is dealing with, we highly recommend that all our clients have direct deposit in place for a fast, secure, and contact-free way to receive your return.

We understand that organizing and planning your tax returns can be stressful, and we’re here to provide you with the information and guidance you need — along with flawless tax preparation to optimize your financial situation. Our talented team is committed to providing the value you have come to expect from CJBS, and we look forward to serving you this tax season and throughout the year. Please feel free to contact us with any questions you may have.

Stay safe & healthy,  

The CJBS Team