How to Maneuver through Tax Season

• May 12, 2022
• |
• BestBizFinder

1. Start early to avoid delay

According to the IRS, this year's filing season can be tough, as IRS employees work hard to answer questions about new and potentially confusing filing requirements. If your return is flagged for a review, your refund will almost certainly be delayed. What helps?

If your tax return is simple (filed as a single W-2 with standard deductions), get it done early and file electronically. Avoid potential mail delays by setting up a direct filing with the IRS.

If your tax return is more complex, gather your information and sign up for the help you'll need ASAP. The earlier you start the process, the more time you will have to track down missing information, settle discrepancies, or find a qualified tax professional.

 2. Provide accurate report

Inaccuracy is a common reason for IRS audits. The IRS matches the information you provide on your tax return with your employer's W-2 forms; 1099s from clients, banks, or investment firms; and payment data from the government itself. If your tax return differs from what the IRS has on file, it may be flagged for manual review, which can lead to a full audit and possibly delay your refund.

 3. Plan to extend now if you need an extension

If you can't get your tax information together by the April 18 deadline, you can file an extension to automatically move the deadline to October 17. But don't wait until you pay your taxes: The IRS expects you to earn the benefit of the Faith Estimate if you want to avoid penalties and interest. Also consider this year’s entire IRS deadline, including estimated 2022 tax payments.

 4. Claiming Child Tax Credits

Parents may be eligible for child tax credits ranging from $3,000 to $3,600 per child for the 2021 tax year. If you qualify, you may have already received half of the credits available as child tax credit payments in advance between July and December. You can claim the remaining half of your 2021 tax credits using Schedule 8812.

Be sure to double-check for accuracy. If your numbers do not match the IRS data, the agency will flag your return. You can check your numbers with IRS Letter 6419, which details how much taxpayers received in advance of their Child Tax Credit payments. If you can't find your IRS letter, use your tax copy to check Economic Impact Payment amounts.

 5. Reconciliation of stimulus payments and redemption discount credit

If you received a third stimulus payment in 2022, you should have received Letter 6475 from the IRS to document it. You can also check your tax copy for payment details. This information can help you decide whether to claim a refund deduction on your 2022 tax return. The refund deduction credit is for taxpayers who have not yet received the full amount of stimulus due to them in the previous three rounds of stimulus payments—at this point, this is rare.

6. Count the party work as income

If you earn money in the temporary jobs economy — driving for a delivery app, renting a parking space or taking care of dogs at home, for example — you must report your income and pay taxes on it. Depending on whether you worked as an employee or contractor, you may need to file a Schedule C: Profit or Loss from Business. The good news: If you're self-employed, you may be able to deduct some car or home office expenses. The bad news: Business taxes can be a little more complicated. For more information, visit the IRS Craft Economy Tax Center.

 7. Earnings Report on Investments, Including Cryptocurrency

Remember that capital gains taxes are not based on the value of your investments: they are based on the profits you realize when you sell an investment for more than you paid. If you don't sell anything in 2021, you don't owe anything. However, if you sell stocks, mutual funds, real estate, cryptocurrency, or any other investment to make a profit, you must report the gain (or loss) on your tax return and pay applicable capital gains taxes.