Pass on the Paper
Nothing speeds up the process like electronic filing. Despite the uptick in electronic filing over recent years, the agency is still buried in paper, receiving more than 11 million individual returns and 15 million business returns on paper last year.
When filing electronically, there’s a good chance you’ll see your refund within 21 days of acceptance. Just make sure you keep track of your submission and that it is accepted and not bounced back.
Validate Your Return Properly
To file electronically and have your return accepted, you’ll need to validate your return with last year’s adjusted gross income. As simple as this sounds, it’s not as easy as looking at last year’s return if your filing is still pending. In this case, you’ll need to enter $0 for your AGI or the agency may reject the filing.
Reconcile Your Child Tax Credits and Stimulus Payments
Returns with innocuous errors are one of the biggest causes of notices and held-up returns. Simple mistakes or the careless compilation of a return can causes matching errors and throw a wrench in the processing of a return, with two issues being prone for the average taxpayer: the advance child tax credits and stimulus payments.
Taxpayers should pay extra attention to and double check these areas of their returns to avoid delays. While taxpayers may receive a Letter 6419 for child tax credits or Letter 6475 for stimulus checks, it’s still a good idea to verify your payments for these two areas online for the best accuracy.
Another snafu that can arise is for married couples filing jointly. You may each receive separate letters showing only half of your total payments. Make sure you verify and report the total amount in these cases. Remember that avoiding math errors can save a lot of time and headaches later.
Digital Assets and Virtual Currency
For federal tax purposes, virtual currency is treated as property. More and more taxpayers are owners of some type of cryptocurrencies. If you are one of them, you’ll need to answer a question on page one of your tax return.
There is a simple yes or no question on the front of every Form 1040, asking if you received, sold or exchanged any cryptocurrency.
Your answer should be “Yes” if you staked, sold, exchanged, mined or used crypto to purchase goods or services. If you only purchased cryptocurrencies and held them, then you should make sure you check “No.”
A “Yes” here is a flag to the IRS and they’ll be looking for you to report income from staking and mining or gains or losses on Schedule D. It can also fast track your return to the manual review pile, adding further delay to processing your return. But remember, that’s no reason to not answer truthfully.
Reaching the IRS via phone is notoriously difficult (which is why having a CPA prepare your taxes can be more than worth it). Average wait times are exceeding 15 minutes. In response, the IRS is adding monthly walk-in hours on select Saturdays at certain Taxpayer Assistance Centers.
To access this service, you’ll need government-issued photo identification, a Social Security card or your Individual Taxpayer Identification Number and any IRS letters or notices. If you are filing on your own, this can help clear up issues; but remember, it’s best to use a paid preparer. They can handle both the administrative issues and offer their expertise.
The IRS currently faces a significant backlog of returns, often stemming from minor, avoidable issues like “math errors” or paper filing. Consider embracing the tips shared in this article to help ease the tax season for everyone involved. Additionally, don’t hesitate to reach out to a tax advisor for personalized assistance and guidance.
LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.