Tax season is around the corner and it could be a chaotic one.
The pandemic has made for a challenging couple of years for the Internal Revenue Service. The agency is still working to process millions of returns from last year, according to a newly released report.
The report released by the National Taxpayer Advocate says in December 2021, the IRS had six million unprocessed individual tax returns. Returns with math errors and discrepancies slowed processing, according to the report.
Tax experts said if you want to avoid delays this year, you will need to be prepared.
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“That’s the most important thing with taxes, keeping great documentation, and unfortunately, many people don’t have the documentation needed,” Craig Kirsner, MBA said.
Kirsner, with Stuart Estate Planning Wealth Advisors, said this year taxpayers will need to be on the lookout for extra paperwork before filing.
If you received the child tax credit, you should be on the lookout for a letter known as a 6419 to arrive from the IRS.
Stimulus check recipients should be on the lookout for letter 6419. If you received unemployment benefits, you should receive a 1099-G form from the state’s unemployment agency.
These documents will provide you with the exact amount of a money you received and could help you avoid making math errors.
“If you ever do get audited, the paper never forgets, but your mind might, so it’s important to keep good records,” Kirsner said.
Another way to avoid processing delays, according to the IRS, is filing electronically instead of sending paper through the mail.
“A lot of clients come in and say they don’t like filing electronically, and I say, why not. There is no reason not to in this day and age,” Howard Dvorkin, a certified public accountant, said.
Dvorkin said taxpayers who made $73,000 or less in 2021 can file their taxes online for free using the IRS’s Free File program. He said it’s also a good idea to decide if you will use a professional to prepare your taxes. If you do, he says you should do your research.
“You need to be very very careful, not all tax professionals are created the same and you have got to be cognizant that there is a lot of fraud going on,” Dvorkin said.
Despite the backlog, the IRS says they anticipate most filers will receive their refund within 21 days of when they file electronically, if they choose direct deposit and there are no issues with their return.
If there are issues, resolving the issues could take some time because those returns will need to be manually reviewed and processed.