The Internal Revenue Service urged all the taxpayers to make significant Tax Preparation moves this month to assist them to file their federal tax returns in 2022, including extraordinary steps related to the advance Child Tax Credit payments and Economic Impact Payments.
This is the second in a progression of suggestions to assist taxpayers with preparing for the upcoming tax filing season. A unique page, refreshed and accessible on IRS.gov, outlines steps that taxpayers can take to make tax filing easier in 2022.
Here are some vital things for taxpayers to consider before they file for next year.
Check on advance Child Tax Credit payments
Families who received advance payments will have to compare it with the payments they have received in 2021 for Child Tax Credit with the amount they can properly claim on their 2021 tax return.
Taxpayers will have to claim a credit for the outstanding amount of Child Tax Credit on their 2021 tax return if they have received less than the amount for which they’re eligible. And the taxpayers will need to repay the excess amount when they file the return if they have received more than the amount, they are eligible.
IRS will send Letter 6419 in January 2022 with the aggregate amount of advance Child Tax Credit payments taxpayers received in 2021. Taxpayers should keep all the IRS letters they receive about advance Child Tax Credit payments with their tax records.
Individuals who didn’t receive the monthly advance payments in 2021 could still receive an amount in lump-sum but they will have to claim the Child Tax Credit when they file for a 2021 Federal Income Tax Return in the upcoming year. It will also include the taxpayers who don’t usually need to file a return.
Economic Impact Payments and Claiming the Recovery Rebate Credit
People who did not receive the full amount or who were disqualified for the third Economic Impact Payment might be eligible for the Recovery Rebate Credit based on their tax information of 2021. Such individuals will have to file a 2021 tax return to claim the credit even if they don’t generally file it.
People will also be required with the amount of their third Economic Impact Payment and any other Plus-Up Payments they might have received in calculating their exact 2021 Recovery Rebate Credit amount while filing their tax return. People should ensure that they use the exact payment amounts and it will help in avoiding the processing delays which might slower their refund procedure.
The IRS will send Letter 6475 in early 2022 which will contain the entire amount of the third Economic Impact Payment and any other Plus-Up Payments that were received. People are advised to keep this and any other letters from the IRS about their payments with all the other tax records. People can also access their Economic Impact Payment amounts by logging on to their online account at IRS.gov.
Charitable deduction changes
Taxpayers who don’t list the deductions may be eligible for taking a charitable deduction up to $600 for taxpayers who are married and filing a joint return. Along with this, a deduction of up to $300 for other filers for the cash contribution they have made to qualifying organizations in 2021.
Get banked to get ready to direct deposit
Direct deposit provides taxpayers an opportunity to access their refund faster as compared to the paper check. Individuals who don’t have a bank account can easily learn to open it through the National Credit Union Locator Tool or at an FDIC-insured bank. Veterans can check the Veterans Benefits Banking Program for accessing the financial services at participating banks.
Links to all the publications, online tools, and other helpful resources are available at IRS.gov/getready.