It’s not too early to start thinking about your 2022 income-tax return, if you can bear the thought.
That’s because the tax-filing season is scheduled to start on Monday, Jan. 23, the Internal Revenue Service announced Thursday. That’s less than two weeks away.
April 18 is the deadline for most people to file a return and pay any taxes due. Taking an extension allows an extra six months, giving an Oct. 16 deadline to submit a tax return.
The IRS is expecting more than 168 million individual tax returns this year, it said.
Most households come away with a refund, making for a major financial event during the year. Two-thirds of individual taxpayers came away with a refund last year averaging around $3,200, according to IRS data through late October.
This year, refunds will be arriving in a time of high inflation and potential recession worries—and experts caution there’s a good chance many refunds could be smaller, now that pandemic-era increases to certain tax credits have vanished.
Maximizing an income-tax refund starts by staying organized and knowing when to be on the lookout for the tax forms that pour in from employers, banks, brokers, mortgage lenders and others.
Hurrying too soon, a person might overlook a credit, deduction or piece of paperwork to back a claim. The same goes if they’re rushing at the last minute. An error could snag a refund and hold up a return inside the IRS, as it runs another tax season while cutting a backlog.
The tax agency, flush with more funding through the Inflation Reduction Act, has been hiring and training more staff to help make this tax season a little smoother than recent years, said acting IRS Commissioner Doug O’Donnell.
“While much work remains after several difficult years, we expect people to experience improvements this tax season,” he said in a statement.
A day earlier, Erin Collins, the IRS’s national taxpayer advocate, said “the good news is that since the close of the 2022 filing season, the IRS has made considerable progress in reducing the volume of unprocessed returns and correspondence.”
“We have begun to see light at the end of the tunnel. I am just not sure how much further we need to travel before we see sunlight,” Collins added.
Here are key tax season dates to help you plan for your maximum refund:
January 23: The IRS will start accepting and processing returns, though tax preparers and software providers may already be accepting returns. Whenever taxpayers file, it’s best to do it electronically, with direct-deposit information included. Most refunds are issued within 21 days, the IRS said.
The IRS Free File program starts Jan. 13. Taxpayers making $73,000 or less can use the program to file their taxes at no cost through participating tax software providers.
January 31: By this point, employers should have furnished W-2s, the forms that display a worker’s wages, tips and other compensation, said Curtis Tatum, director of federal payroll compliance and in-house counsel at the American Payroll Association. The W-2 also lists the money withheld for income tax and payroll taxes, plus state and local taxes, he noted.
By this same date, independent contractors and gig-economy workers should have received the 1099-NEC, the tax reporting paperwork for non-employee compensation, Tatum said.
Other forms may arrive by the end of January. These include the 1099-DIV (for distributions like dividends), the 1099-INT (for interest income), and the 1099-K (for money received via third-party payment platforms).
The various 1099 forms could come by mid-February, or even up to March 1, if they are coming from a broker, the IRS notes.
Last month, the IRS delayed rules that would have triggered the 1099-K forms after $600 in payments and just one transaction. Instead, it’s sticking this year with the existing rules that trigger the form after the recipient took in at least $20,000 and had at least 200 yearly transactions.
February 15: After this point, the IRS can start issuing refunds on returns claiming the earned-income tax credit and the refundable portion of the child tax credit. The mid-February hold date happens because of a 2015 law, and it holds the taxpayer’s whole refund, not just the money amount linked to those credits.
The IRS ‘Where’s My Refund?’ tool will start giving updates on Feb. 18 for most of the quick-moving filers who claim these credits, the agency said. (The data on the refund tracker is updated once a day, usually overnight.)
Refunds connected to the earned-income tax credit will be available for many starting Feb. 28, the IRS said Thursday. The EITC is geared at low- and moderate-income working households and at least 29.5 million returns claimed the credit last year, IRS records show.
It’s also an example of a tax credit that’s becoming less generous as the pandemic fades. An eligible worker without children could reap up to $500 from the credit this year. That’s three times less than the credit’s approximate $1,500 maximum last year.
April 18: This is Tax Day, the time when people need to file their 2022 return and pay any owed taxes. Tax Day is usually April 15, but because is later this year because April 15 falls on a Saturday, and the District of Columbia has an Emancipation Day holiday on Monday, April 17.
Of course, people can get an automatic six-month extension via Form 4868. But a common mistake is thinking an extension delays the obligation to pay what’s owed. It doesn’t prolong the window for payment. It just adds six months before the IRS will expect the tax return.
Tax Day does not apply to everyone. The IRS often pushes back the deadline for natural-disaster victims. For example, the IRS recently announced California storm victims now have a May 15 deadline to file their 2022 return and pay any due tax bill.
April 18 also marks the last day when people can make contributions for 2022 to certain tax-deferred accounts, such as IRAs and health savings accounts (HSAs).
October 16: This marks the deadline to submit a 2022 return for taxpayers who took an extension. After that, if taxpayers owe money, penalties and interest can apply. If taxpayers do not owe taxes, they would not face penalties on late filing.
But if they do not file a tax return to claim their refund within three years, the money goes back to the government.
This article originally appeared on MarketWatch, was published in Barron’s on January 19, 2023, and was written by Kenneth Corbin.
- Image courtesy of iStock.
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