 Internal Revenue Service IRS tax news! IRS free file now, accepting 2021 tax returns. But first, an attempt at a joke I apologize in advance. I've always been suspicious when the IRS uses the term delighted, as in, taxpayers will be delighted with this new tax law. I mean, why is it that being delighted is good when it's clearly bad to be decapitated? I don't want some modern-day bureaucrat executioner cutting off my light and carrying it away in a basket while stating, let this be an example to all citizens. He or she who does not pay his taxes will be delighted as they take my severed light and mount it on the end of a sharpened stick in front of the IRS office. Wow, that was a dark joke. Well, yeah, because it's about being delighted, darkness being the absence of light. Like, I think that's what the space bureaucracy did to Anakin Skywalker. Turn them into Darth Vader. COVID tax tip 2022-16, January 31, 2022. IRS free file. There's a link to that here available only through IRS.gov. It's now accepting 2021 tax returns. So note, when you're preparing your taxes, you've got a couple different options. You could do it yourself, or you could get some kind of help from a tax professional to help you with the preparation. If you're doing it yourself, you have a few different options to do it. You could do the paper filing. You could use the free file fillable forms, but most people, even with fairly simple types of tax returns, will want to use some type of software. And if your income is below a certain level, you might have access to free software. And you can search for some of those free softwares that are from third party providers through the IRS free file link here. And you could search on the IRS webpage, which helps you to sort out the kind of software that might be available to apply to your particular needs. Some of the things that you'll want to be taking into consideration, some of the limitations, in other words, of the software being free, are that it's going to be under a certain income threshold, and you also want to make sure that you're picking up the software that's going to take care of your state needs and obligations as well and see that it's going to be calculating any earned income tax credit if you need to calculate the earned income tax credit. And that's one of the things, if your income is below a certain level, that you would like the software to do because it's fairly complex to do that calculation. Note that in the past, if your income was below a certain threshold, you may have said, I'm just not going to file at all possibly because I don't owe any taxes, or I'm just going to basically do it with a paper file or the free file fillable forms because it should be a fairly simple process. But these days, it's not a fairly simple process, even for the low income tax returns, which can actually be more complex than, say, a mid-level income related to tax return due to all the changes that have going on, which include changes to the laws. So now we've got laws related to credits that have been changing a lot, so there's not that consistency. We don't know exactly what's going to happen based on the prior year and because people's income situations have changed both for themselves as well as kind of their family units have changed and that's going to make big changes in terms of what the tax return is going to look like. So I would highly recommend then picking up the free file software if you can to help up with the implementation of the data input to get the tax return correct. If your tax return is not correct, they're warning these days that it might take longer to process because they're kind of backed up on the processing log. So if you're looking for the refund as soon as possible, you'd like to do the free file, you'd like to electronically file, at least some way of electronically filing. You'd like to have the direct deposit if possible and you want to avoid any errors which would delay the processing and require the IRS to have manual processing, which they're short on, which could delay any activity. Note that if your income is above the threshold, above 73,000 is the threshold here, then you might consider that at that point hiring someone to help you out with your taxes, not just to finish up what is the immediate need of filling out your taxes for this year, but your income might be above a threshold where you want advice about your tax situation, going into the future, advice that's going to go beyond perhaps just the immediate need of filling out the tax return so you would be liking or looking for someone who's going to be there more in a long term type of basis in that situation and could possibly give you feedback if the IRS has any letters that they're going to send to you or anything happens in the future. Okay, back to the text. IRS free file is available to any person or family with adjusted gross income of $73,000 or less in 2021. The fastest way to get a refund is by filing an accurate return electronically and selecting direct deposit. This year there are eight free file products in English and two in Spanish. This program gives people an opportunity to file their taxes and claim the 2021 recovery rebate credit, the enhanced child tax credit, the earned income tax credit and other credits. So they're really of course trying to push this program at this point in time because they've made a lot of changes to these credits which often apply to lower income individuals and they can be somewhat complex, some of them are refundable, so the tax software would be a great tool for that. So remember some of these, the recovery rebate credit, if you already got paid your stimulus payments then you might not be getting any recovery rebate credit, but if you didn't get your stimulus payments, that's when that would come into play. The enhanced child tax credit, they increased the child tax credit for the tax year 2021 and then they gave, they tried to give half of it out in the form of an advanced child tax credit so you'd still get some of the child tax credit when you file the tax return, generally half of it if everything went as it should and then of course you could have differences where you didn't get the payments for whatever reason, you could also have situations where you got the payment and you shouldn't have gotten the payment depending on some circumstances. So the tax software will hopefully help out with that situation and the earned income tax credit has always been kind of a difficult credit to calculate because it's based on multiple different variables including earned income and basically how many dependents someone has and now they've added more complications to it including possibly being able to take into consideration prior your income which is really nice to have tax software to help out with that one. So taxpayers can also use free file to claim their remaining child tax credit or any advance payments they did not receive in 2021. By law the IRS cannot release earned income tax credit and additional child tax credit refunds until mid-February so they're going to hold on to these ones that have these particular credits longer but I believe that's because they're trying to reduce the fraud that will take place with regards to these credits because they're refundable credits and the higher the refundable credits then the higher the ability or the demand is going to be for people to steal information so they can file fraudulent returns and possibly get access to these refundable credits so they're going to try to stop that now by holding on to the tax returns a little bit longer so they can mitigate that at least to some degree. Additionally IRS free file users can use direct pay or electronic options to submit their tax payments if they owe a balance. As an alternative free file fillable forms are electronic federal tax forms available to everyone regardless of income. So the free file fillable forms are kind of like an electronic way of doing it by hand so you'd still be basically doing the calculations so I wouldn't really recommend that unless you're quite competent with doing that kind of format I would recommend using the software which has an interview type of process which should give you some support for some of these items. Only people who are knowledgeable and comfortable preparing their own tax return should use them. Taxpayers can access IRS free file in four easy steps. One, gather all necessary documents and income statements that support deductions and credits. Taxpayers should complete and e-file their tax return only when they have all their income and deduction statements in hand. Note that if you don't have all your income and deduction statements if you try to file earlier then you have all the information to file then what you have may not match what the IRS has and that could delay the tax return. So people trying to get their refund sooner may subject themselves to a delay if they try to file before they have all the information because it doesn't take an actual person on the IRS to determine that you didn't add something on like a 1099 form or a W-2 form because those forms are not only going to you they're going to the IRS. So the IRS has those forms. If you don't include those or include a different amount on your form the IRS is going to have to process it in basic they'll be able to see that electronically. It doesn't take a person to figure that out but it does take a person to deal with the problem which is most likely going to be what's going to be the calculation of the difference of the taxes and send out a letter and a proposed adjustment that will most likely take a while or possibly these days with the IRS. So number two, go to IRS.gov to see all filing options. Number three, use the quote online lookup and quote tool to find the right free file product or use the quote browse all offers and quote tool to review all options. Each IRS free file partner sets its own eligibility standards which are generally based on income, age, and state residency. For select an IRS free file provider and follow the link to their webpage to begin a tax return. Child tax credit 2021 recovery rebate credit and other tax benefits. IRS free file is the fastest and easiest way for taxpayers to claim their child tax credit 2021 recovery rebate credit and other tax benefits such as the earned income tax credit. People who received one or more advanced child tax credit payments in 2021 should carefully review their tax return for accuracy before filing to avoid processing delays. So they're very worried and probably rightly so that people are going to miscalculate the child tax credit because one, it's different than the prior years and two, we got these advanced payments that went out. So again, if you put something in the tax return that's different than what the IRS understands it to be with regards to the calculation of the credit or with regards to the amount of advanced payments that they think they gave you because they know that amount because they sent out those that money, then they're going to have to most likely deal with that and that's going to cause a delay as they try to figure out what the differences are. Families who received advanced payments will need to compare the advanced payments they've received with the amount they can properly claim on their 2021 tax return and late December the IRS started sending letter 6419 2021 advanced CTC to taxpayers who received an advanced child tax credit payment. The letter contains the total amount that the individual needs to file accurately and avoid a processing delay. People who received advanced payments can also view their payment amounts on their IRS online account available on irs.gov. So you might want to get access to that online account whether you're a tax payer or if you're a tax professional you might want to encourage your employee, your clients to get into that account so they can answer any of these questions in the event that they don't have the proper documentation. The IRS is sending letter 6475, your third economic impact payment to individuals who received a third economic impact payment in 2021 including initial and quote plus up and quote payments. Most eligible people already received their economic impact payments. This letter will help them determine if they are eligible to claim the 2021 recovery rebate credit for missing third payment. If so, they must file a 2021 tax return to claim the credit individuals can also securely access IRS online account to view the total amount of their third economic impact payment. So just a quick recap, the economic impact payments or the stimulus payments you might know them as are basically prepayments of what would be called the recovery rebate credit on the tax return. The first two are going to be tied to 2020 tax year, not the current tax year we're working on which is 2021. So we're thinking about the third one in 2021. If you got the full payment, which most people hopefully should have, then you don't have you're not going to get another benefit of the recovery rebate credit and everything should have worked out fine. But if there was a problem with it, you didn't get then the recovery of it for the third one is to file the tax return for 2021 by, you know, 2022 April 18th or whatever and take the recovery rebate credit. If there was a problem in the first two, then those are tied to the 2020 tax return and you'd have to file the 2020 tax return to get the recovery rebate credit for it. So there's links to the free file stuff and some other links here and there'll be a link to this in the description.