IRS Tax Filing Dates for 2022 You Need to Know About

IRS Tax Filing Dates for 2022 You Need to Know About

by | Jan 25, 2022 | tax filing

A rampant virus, skeleton staff, ongoing legislative changes, and flailing funding all make for a decidedly bumpy tax season ahead. The Internal Revenue Service (IRS) is battling backlogs with a grossly understaffed team (20,000 fewer employees than in 2010) and the delays and complexities engendered by stimulus check deliveries and advances in Child Tax Credits. 

President Biden’s Build Back Better plan faces gridlock in the Senate, only making matters worse. As a result, taxpayers are in for a world of frustration, and the IRS urges attentiveness in cases of tax-related documents. 

More specifically, the department counsels are looking out for W-2, 1099 forms, and additional letters regarding Child Tax Credits and Economic Impact Payments for those who received benefits last year. 

Read on to know more about precisely what you can expect during the upcoming tax season: key dates, important information, and tips to help you prepare better.

Important IRS Dates for 2022 to Keep a Tab On

Important-IRS-Dates-for-2022-to-Keep-a-Tab-On

February 15—deadline for eligible employees to submit W-4 forms (tax exemption) to employers.

April 1—Deadline for Required Minimum Distribution (RMD) payments from retirement accounts for senior citizens who turned 72 in 2021.

April 18—Deadline for tax filing for most Americans.

April 19—Tax filing deadline for taxpayers in Maine and Massachusetts due to Patriots’ Day falls on April 18 in those states.

May 16—Deadline for tax filing submissions for victims of the Colorado wildfires and Midwest Tornados. 

June 15—Tax filing deadline for those applying for extensions, military members, and Americans living overseas. 

October 17—Deadline for taxpayers who requested an extension for tax filing submissions. 

December 31—RMD contribution deadlines for those 73 and older. 

Typically, the deadline to file and pay taxes is April 15; however, the dates have been adjusted due to the public holidays. With Emancipation Day falling on the 15th, the deadline has been extended to April 18. A similar occurrence is visible in Maine and Massachusetts due to Patriots’ Day on April 18.

Things to Keep in Mind While Filing Tax in 2022

As you prepare to file taxes for 2022, we recommend keeping the following in mind: 

Smaller refunds

The lower refunds that have been forecasted are due to shifts in policy and shrinking resources. While the Biden administration has diverted an additional 2 billion USD to the agency via the American Rescue Plan, funding remains an issue. 

On a grassroots level, individuals may owe more to the government and receive less if they did not opt-out of Child Tax Credits or didn’t include any student loan deductions. Therefore, taxpayers have been advised to brace themselves given the fluid situation. 

Child Tax Credits

As discussed above, Child Tax Credits could impact your tax outlook for the year, given that Congress not only inflated the credits but also began to pay out half of the credit value in advance. 

This was done through monthly installments to help struggling families quickly. Additionally, the CTC was refundable (there was no minimum income required to claim it) but fluctuated according to income levels. 

Ideally, taxpayers who received the installments would receive the remaining half of the credits as a part of their tax refund, but reconciling exactly how much was paid can complicate matters. 

Some may have received more than they were eligible for, and others less. For this reason, it is imperative to safeguard Letter 6419 sent to all payment receivers so that it may be verified in your tax return.

Economic Impact Payments 

Stimulus checks of 1400 USD were issued to eligible receivers from March 2021 as a part of the Economic Impact Payments scheme. If you received the entirety of the payment, you need not include any information while filing your taxes. 

However, those missing some payments could be eligible to claim the Recovery Rebate Credit for the same. The missing amount would be included in tax refunds. You must note, though, Letter 6475 (Your Third Economic Impact Statement) plays a crucial role in determining whether this applies to you. Much like Letter 6419, it must be given equal importance as W-2 and 1099 forms.

Extending Your Submission Deadline

While it is never advised to miss tax deadlines, those who require more time can qualify for an immediate extension by filling and submitting Form 4868. 

This grants a 4-month extension, usually till October 15. However, with it being a Saturday, the final deadline is October 17. The IRS stresses that this extension is only for submitting tax returns and does not apply to payments. 

If an individual owes taxes, the deadline remains April 15. Failing to pay on time results in penalty fees. Taxpayers can incur hefty charges: 5% of the amount due each month, a monthly penalty of 0.5% of the unpaid amount, 3% in accrued interest, and a maximum of 25% of what is owed. 

When Can you Expect your Refund?

The IRS urges taxpayers to check thoroughly for document and numerical accuracy and to file their taxes as soon as their documentation is ready. 

The agency advises filing online and opting for a direct deposit to make the process as seamless as possible for a quick return. Taxpayers who choose direct deposits could see their accounts credited within 21 days of submission by approximately mid-February. 

However, refunds involving often misused credits such as the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (CTC) will take longer due to more stringent verification processes. 

Also read: All You Need to Know About How to File Tax Returns Online

What Next? 

Resting your laurels will not quicken or ease the process; hence compiling documents and visiting a tax planner should be top of your priority list. A non-exhaustive list of documents required are listed below:

  • W-2 form from your employer.
  • 1099 form for income earned from investments.
  • Mortgage payment proofs.
  • Letter 6149 for Child Tax Credits.
  • Letter 6475 for Economic Impact Payments.
  • Receipts and bank statements for deductible expenses.
  • Proofs of taxable transactions and investments for things such as cryptocurrency and Non-Fungible Tokens (NFTs).

As an Indian in unfamiliar territory, preparing to file your taxes can be a daunting task. AOTAX has been helping Indian professionals in the US with their tax requirements for almost two decades and provides hassle-free consultancy, planning, and filing services. So, sign up for free today and let us help you with financial peace of mind.

Income Tax Refund V/S Owning tax

Income Tax Refund V/S Owning tax

by | Aug 12, 2020 | additional debts, COVID - 19, Income Tax Refund, IRS

Income Tax Refund V/S Owning tax

In these challenging times of financial distress caused due to the pandemic COVID-19, receipt of your tax refund is like a gift. If you are receiving a substantial amount as your tax return you can use it for various useful purposes during these difficult times. However, if you have still not received your tax refund and are wondering what could be the reason; it’s time to analyze the possibility i.e. the IRS seized your tax refund.

You might also wonder that “would you obtain your tax refund if you owe tax to the IRS?” So, let us understand the various aspects related to the scenario in which you apprehend the receipt of your tax

When will the IRS seize your tax refund?

If you owe taxes to the IRS, then you would not be able to get back your tax refund. The IRS has the power to garnish your refund to offset the tax debts you owe. Some of the major tax debts which can lead to the IRS’s seizure of your tax refunds are listed below.

a.Back Taxes

You are said to have back taxes when you have any taxes unpaid or partially paid at federal, state, or local level. If you have tax debts at any of these levels, then your tax refunds might be garnished by the IRS. In such cases, the IRS would send you warning notice about a part of the entire of your tax refund being used to offset your back taxes. Even if you have selected for options like the IRS installment agreement plan, the IRS can still take your tax refund back and pay your tax debts by using them.

If you are willing to relieve yourself from the tax debts, you can do so by filing for bankruptcy. If you are filing for bankruptcy, the IRS would provide you with three payment priorities.

 

  • Priority and non-dischargeable unsecured tax debt – These are those debts that cannot be discharged and must be cleared first before any other debt such as trust fund taxes, taxes that are assessable but have not been assessed, etc.
  • Non-priority and non-dischargeable unsecured tax debt – These taxes are not placed on the top priority and they cannot be discharged. These taxes include taxes on fraudulent returns, taxes filed late within two years of the date of filing, etc.
  • Non-priority and dischargeable unsecured tax debt–These taxes are unsecured, are not prioritized, and can be forgiven too.

b.Child and Spousal Support

In case you are a parent who is providing child support, the Child Support Agency of your state will inform the Treasury Department about your child support debt. The Treasury Department will send you a pre-offset notice which informs you about how much debt you owe the working of the offset program and the ways by which you can pay off your child support debts. This same procedure is applicable for spousal support as well for tax debt offset by the IRS.

c.Other additional debts

In addition to the Child and spousal support, back taxes there are some other debts also which can be garnished by the IRs through the seizure of your tax refunds. These can be your Student loan payments or your State Unemployment compensation.

If you have not paid your federally-insured student loans, the IRS can seize your tax refund for the payment of your outstanding debts related to a Student loan. Moreover, the US Education Department has the authority to let your employer garnish up to 15% of your income until all your loan debts are cleared.

The IRS can also seize your tax refunds in case of any unemployment compensation collected by you for which you were not eligible. The Unemployment program of your State can ask the IRS or the Treasury Department to offset your tax refunds.

How can you obtain your complete tax refund?

If you wish to obtain your entire tax refund without your refund being garnished for tax debt settlement, then you must pay your taxes on time and in full amount. In case, you have other debts like student loans or spousal support debt, etc. you can try to pay your debts as much as you can. This will help you in obtaining some more tax refunds.

 If you are facing tax issues, you must sincerely work towards the resolution of these issues by opting for professional assistance. In the year 2018, over 13 million Americans owed more than any amount of $128 billion to the IRS for taxes and penalties. You should try to find out about the various tax issue resolution services such as the Installment Agreement, Stair Step Agreement, Partial Pay Agreement, etc. for resolving your tax problems.

Conclusion

Hence, a tax refund is important for everyone, especially during these financially difficult times. You must file your tax returns on time and pay your taxes on time. You must accurately file your taxes to make the maximum utilization of your return obtained.

Reference

 https://www.communitytax.com/getting-tax-refund-if-you-owe-irs/

The changes in the NRI norms in India 2020, resulting in higher tax liability

The changes in the NRI norms in India 2020, resulting in higher tax liability

by | Jul 22, 2020 | coronavirus, NRI Norms, Tax Liabilities, Taxation

The changes in the NRI norms in India 2020, resulting in higher tax liability

The novel coronavirus has been spreading across the world very rapidly making millions and millions of people sick. To put a brake on the speedily spreading coronavirus, domestic and international flights had been stopped on an interim basis by the Indian Government. As a result, many NRIs who had visited India had to extend their stay in India till the restrictions on flights are lifted.This extension in the stay of the NRIs and the foreigners in India due to the pandemic COVID-19 might lead to an increase in their tax liabilities. Non-resident Indians may be stuck in the country due to the restrictions imposed on travel, illnesses, or restrictions being imposed by the other countries. This extended stay can cause higher tax incidence if the stay exceeds the prescribed thresholds unless specific exemptions are provided by the Government to reduce the extra tax liabilities. In simple terms, the extended-stay by an NRI in India can bring him into the Indian income tax fold. 

The taxation regime

According to the Income Tax Law, a person can be classified as a resident or a non-resident of India based upon his duration of stay in the country during a financial year. 

  1. An NRI who is visiting India becomes a resident of India if he stays in India for 182 days or more in a financial year along with a stay of 365 days or more in four preceding years. This criterion applies to an NRI who is either a citizen of India or a person of Indian origin.
  2. However, according to the latest Finance Act, 2020 there have been certain amendments made to the tax residence criteria. From the Financial year 2020-21, the threshold for the period of stay for an NRI staying in India has been reduced to 120 days from 182 days. 
  3. So, an NRI can become a tax resident with a minimum of 120 days stay only if the NRI is earning above Rs. 15 lakhs in a particular financial year. In this case, the NRI would be taxed on his global income
  4. However, the threshold of 120 days does not apply for those NRIs who have an Indian income of less than Rs. 15 lakhs and would become a resident only on a stay of 182 days in India.
  5. The Indian Income Tax Law does not differentiate between the voluntary or involuntary stay of an NRI in India for the determination of his residence for taxation. NRIs staying in India beyond their prescribed thresholds would attract tax liability even if they wanted to leave India.

Extension of lockdown and implications of being a tax resident

Due to the ongoing lockdown and non-resumption of International flights, an NRI would be taxable on his Indian income. NRIs would also face problems related to dual tax residency or citizenship. However, an NRI who became a tax resident of India is not liable to file his tax returns in India immediately. The process of taxation would need an evaluation on a case-to-case basis.

An NRI who has a taxable income in India above the basic limit of exemption i.e. Rs. 2.5 lakhs should file an income tax return in India. NRIs becoming tax residents of India might also face other problems such as taxability of the interest on their NRE accounts. Moreover, there might be changes in the TDS rates on their Indian income. 

However, the Government of India might give some clarification on the matter related to the tax residency of the NRIs who have been bound to stay longer in India due to the current COVID-19 situations.  The OECD (Organization for Economic Co-operation and Development) has recommended for some exemptions in the threshold limits related to the tax residency of NRIs. However, there has been notification on this but the Government might issue relaxation on this.

If there are no relaxations from the Indian Government, then the NRIs will have to file income tax returns in India. But, the NRIs need not pay any tax in case of the absence of an income in India. Also, they do not need to pay any tax on their foreign income in India.

Conclusion

Hence, it is important for the NRIs who have been held up in India due to the lockdown to consult about the impact of the new regulations related to tax residency rules in India. They must understand the rules and fulfill the compliances if applicable in their case.

  

How to return an incorrect Tax Refund?

How to return an incorrect Tax Refund?

by | Feb 7, 2020 | paper treasury cheque, Tax Refund, Tax refund cheque

How to return an incorrect Tax Refund?

There might be situations in which you might have obtained an incorrect tax refund. You are not entitled to obtain that tax refund or you might have obtained more than what you should obtain; in such cases, you can return the incorrect tax refund.

There can be several scenarios related to incorrect tax refunds obtained from the IRS.

  1. In case of the refund obtained was a paper treasury cheque and has not been cashed.
  2. In case of the refund obtained was a paper treasury cheque and has been cashed.
  3. In case of the refund obtained being a direct deposit.

Refund is paper treasury cheque and has not been cashed

In this scenario, the below-mentioned steps can be followed.

  1. On the back of the cheque in the endorsement section, “Void” has to be written.
  2. The paper cheque must be submitted immediately to the correct IRS location but by 21days of receipt of the refund. The appropriate location i.e. the name of the city is mentioned in an abbreviated form in the bottom text line. It is mentioned just in front of the words “Tax Refund” in the Refund cheque.
  3. You should simply place the cheque within the envelope without bending it, putting any staple or paper clip on it.
  4. You will have to add a note highlighting “Return of erroneous refund cheque” and should explain in brief the actual reason for returning the refund cheque.

Refund is paper treasury cheque and has been cashed

In case the refund received is erroneous, is in the form of paper treasury cheque and has been cashed then the below-mentioned steps need to be taken.

  1. In this case, you must submit a personal cheque or a money order to the appropriate IRS location. The location i.e. the name of the city must be mentioned in the form of an abbreviation in the bottom text line just in front of the words “Tax Refund”.
  2. This should be done immediately within 21 days of the receipt of the tax refund.
  3. Suppose, you do not have access to the copy of the cheque then you can contact the operations team of the IRS and connect with the assistor. The assistor will give you detailed information on what to do for returning an erroneous tax refund.
  4. You need to mention certain details on the cheque or money order which you are submitting to the IRS.
  • You need to write “Payment of erroneous refund” on the cheque or money order.
  •  You will also have to mention the tax period for which the tax refund was issued and TIN (Tax Identification Number).

 5. Along with these details, you should also give a brief explanation of the reason for which the refund is being done.

 6. Since you have cashed an incorrect refund cheque you might have to pay some additional interest to the IRS.

Refund is done by direct deposit

  1. You will have to contact the Automated Clearing House (ACH) department of the bank or the financial institution where the direct deposit has been received. You can inform them about the actual cause and request them to return the refund received to the IRS.
  2. You will have to call on the IRS toll-free number and explain to them the reason underlying the return of the refund obtained in the form of a direct deposit.
  3. There may be a need for paying interest on the erroneous refund.

In general, when there is a change in the tax refund by the IRS then there would a notice sent by the IRS to your mailing address. This notice would explain to you the reason for the adjustments made by the IRS in the tax refunds. You should review the information given and check the refund. Moreover, you can contact the toll-free number for further support or information on this.

Conclusion

So, obtaining an incorrect tax refund can be quite a common happening but when you have an idea of what to do next then it would be easier. You can easily return your incorrect refund obtained and generate the request for obtaining the correct refund soon. 

Reference

  1. https://www.irs.gov/taxtopics/tc161

 

Is it possible to maximize your tax refunds?

Is it possible to maximize your tax refunds?

by | Jan 9, 2020 | 401(k), Deduction & Credits, Investment & Income, IRA, tax deductions, tax filing, tax return, taxes

Is it possible to maximize your tax refunds?

Mostly, we think that when we have filed for our tax return and finally obtained our tax return brings an end to the entire procedure for the current year. There is nothing more to worry about or think about tax and tax returns throughout the year. However, even after receiving your tax return for the current year you can think about maximizing your tax refunds.

If you are interested in learning about how to maximize your tax refunds for the next year, then you can follow some simple tips. Let us have a look at these tips which can increase your tax refunds in the next year.

1.Deduction of education-related costs

There are numerous costs related to education that are deductible. In case you are the owner of a business or you are employed in an organization, you can try and deduct those education costs which are needed for improving your skills at the workplace. If you have an income that is less than $80,000 then you might be able to take up tuition and the fee deduction would amount up to $4,000 for the tuition, fees, and books.  For instance, if you and your family members are together pursuing a degree then you can take up an American Opportunity Tax Credit which is a maximum annual credit of $2,500 for each student provided your income is less than $90,000 and is less than $180,000 for married couples who would be filing tax jointly.

2.Deduction of expenses incurred in job-hunting

There are various costs associated with job hunting which can be reduced such as deduction of the cost incurred during travel for jobs, meals and telephone calls associated with job search, preparation of a resume, career counseling, payment made to employment agencies, etc. These expenses account for almost 2% of your annual income even if you are not going to change your job anytime soon in the future.  But, if it is your search or hunt for your first job then the expenses are unavoidable.

3.Take deductions available for business owners

When you are the owner of a business, you should keep a track of the business expenses and avail deductions that are available. Expenses like business dinners, mileage of the car, use of a computer, appointments, etc. can be used to increase your deductions available. You can also motivate your children to work in your business along with you. You can pay those wages for their jobs and as a result, they will not have to pay different varieties of taxes like other employees working with you.

1.Making investments in future

You should start investing in various plans such as 401(k), IRA, tax-advantaged avenues, employee stock purchase plans, etc. You should start contributing to these avenues as much as you can. If you are making smaller contributions now it would be helpful rather than making huge contributions at a time which is quite nearer to your retirement. By doing this now, you are saving now and also taking an initiative towards boosting your wealth also. This extra compounding will help increase your corpus for retirement.

2.Your own home

 Your tax refund can have a remarkable increase in the mortgage interest and property tax deductions. When you are purchasing your house, you must check the settlement statement of your house properly and find out the deductible items.  In your closing statement, you can find out different deductible items such as property taxes, prepaid interest, points, etc. When you are acquiring your own house, those points that are paid are deductible during that year. If there are any points paid for the refinancing of the loan, then they should be written off over the loan’s length. Again if you are refinancing, you must not forget to write off the remaining points from the previous loan.

3.Charity

 Charity can also get you some tax deductions such as donating clothes, household goods, linen, sports items, etc. Donation of books and magazines made to the library can also get you tax deductions. You can make a note of the donated items and can deduct these at the time of tax filing.

Hence, tax refunds can be maximized by carefully keeping a note of the various deductibles that are available and those that have been availed by you. You can, later on, use these to maximize tax returns at the time of tax filing.