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There’s a growing list of essential things taxpayers need to know as the IRS enters a tough season with limited staff and a backlog from 2021 that still has millions of returns.
There were 6 million unprocessed individual returns as of Dec. 31, according to the IRS, and those with notices or blocked refunds are having trouble reaching the agency by phone.
Fewer than 15,000 agents were available to answer the 240 million incoming calls in the first half of 2021, or one person for every 16,000 calls, according to the National Taxpayer Advocate.
That’s why it’s essential to avoid mistakes in your 2021 filing. Here’s what to know before filing this season.
1. Pass the paper
Given this backlog of millions of returns, the IRS continues to emphasize the importance of e-filing this tax season.
“Paper is the kryptonite of the IRS, and the agency is buried there,” National Taxpayer Advocate Erin Collins said this week during a hearing before the IRS’ Ways and Means Oversight Subcommittee. Bedroom.
“The IRS always transcribes paper returns line by line, number by number,” she added. “They received about 17 million original paper returns last year, and processing delays lasted up to 10 months.”
However, you can receive your refund within 21 days by filing an online statement with direct deposit for payment, assuming there are no issues.
“The IRS has been pushing this point for years,” said Certified Financial Planner Larry Harris, director of tax services at Parsec Financial in Asheville, North Carolina, noting the efficiency and security of e-filing.
Electronically filed tax returns also offer another key benefit: digital confirmation of receipt from the IRS, he said.
2. Check tax forms with IRS transcripts
Although the IRS is moving away from facial recognition, you may still have to go through some “uncomfortable” steps to access your account online, Harris said.
After logging in, however, you’ll have access to tax records, including IRS transcripts that you can use to verify details and avoid errors that could flag your return, he said.
“The most important thing is the salary and income transcript,” said Tommy Lucas, CFP and Enrolled Agent at Moisand Fitzgerald Tamayo in Orlando, Florida. “This will especially help self-employed or gig workers with income from many different sources.”
If you’re looking for multiple 1099-NEC forms to verify your income, the Wage and Income Transcript shows all the forms the IRS has received in one place.
How to Access IRS Transcripts Online
1. You need to register or login to your IRS online account.
2. After logging in, click “Get Online Transcript” here.
3. Choose a reason from the drop-down menu.
4. Select your IRS transcript by year and upload .pdf.
You can also use transcripts to check details of past returns or frequently missed tax forms submitted on your behalf.
While some of the transcripts use a three-digit transaction code with a brief description to identify each entry, you can use the Transaction Codes Pocket Guide to check line items that may not be clear. Of course, you can also hire a tax specialist.
3. Reconcile Child Tax Credit and Stimulus Payments
While error-free tax filings are essential this season, the IRS has already warned of two issues: advance child tax credits and stimulus payments.
“We urge special consideration for those who received an economic impact payment or child advance tax credit last year,” IRS Commissioner Chuck Rettig said in a statement. “People should make sure they report the correct amount on their tax return to avoid delays.”
The IRS issued 7.4 million “math error” notices for stimulus payment errors from Jan. 1 to July 15, 2021, delaying refunds, and many filers are still awaiting a resolution.
Although the IRS sends letter 6419 for child tax credits and letter 6475 for stimulus checks, experts suggest verifying these payments online in the “records” section and on your accounts transcript.
However, if you’re a married couple filing together, you may receive separate letters, each reflecting half of those payments, Lucas said. You should see the total on your account statement and this figure will appear on your statement.
4. Answer the “virtual currency” question
Millions of Americans own cryptocurrency, and they will soon be faced with an important question about “virtual currency” on page 1 of their tax return.
The yes or no question reads: “At any time in 2021, did you receive, sell, trade, or otherwise dispose of virtual currency?”
You’ll need to answer yes if you sold, traded, mined digital assets, or used them for purchases in 2021. However, it’s important to tick no if you only bought and held crypto, Lucas said.
“If you check yes, you are self-reporting and the IRS is going to look for some sort of capital gain or loss on your Schedule D,” he said, explaining how it might send your return to the pile. requiring a manual. review.
5. Last year’s adjusted gross income
If you file electronically, you must validate your return with your 2020 adjusted gross income. However, if you are one of the millions whose return from last year is still in limbo, the agency has to other tips.
With a 2020 return pending, you must enter $0 for your 2020 AGI for electronic returns, according to the IRS, and if you don’t enter $0, the agency may reject the filing.
“They’ll send it back,” Lucas said, explaining how filers will receive an email from their tax filing software and may not know how to resolve it.
And if you used the non-filer tool in 2021 to claim child tax credit advance payments or your stimulus check, you’ll need to put in $1 for last year’s AGI, according to the IRS.
“This is going to be a pain, so it’s very important that those who are still waiting or using the non-filer tools follow these special instructions from the IRS,” Lucas said.
6. Saturday Hours at Taxpayer Assistance Centers
It’s no secret that reaching the IRS by phone has been difficult. While the agency claims an average wait time of 23 minutes, filers and tax professionals said they waited much longer.
However, the IRS is adding monthly appointment times on select Saturdays at select taxpayer assistance centers starting Feb. 12. Normally, these offices are open Monday to Friday by appointment.
“They want to serve the public and they want to make it easier to file a tax return,” Harris said. “It’s a good decision on their part.”
You’ll need to bring government-issued photo ID, Social Security cards or your individual tax ID number and any letters or notices from the IRS, he said. Staff may also ask for your mailing address, email address and bank details for direct deposit payments.
“Seeing someone in person, especially after two years of the pandemic, might be appealing to some people,” Harris said.