Everything you need to know about this year's complicated tax season

Taxes. Illustrated | iStock

Because of the coronavirus pandemic, staff shortages, budget cuts, and a backlog of returns from 2020 and 2021, the Internal Revenue Service will face "enormous challenges" during the upcoming tax filing season, Treasury officials said earlier this week. Here's what you need to know.

What triggered this warning from Treasury officials?

This isn't the first tax filing season of the pandemic — and that's part of the problem. Treasury officials told reporters during a phone call on Monday that during a typical pre-pandemic year, the IRS would kick off the filing season with a backlog of about 1 million returns. The latest data from the IRS shows that as of Dec. 23, 2021, it had a backlog of 6 million unprocessed individual returns. Additionally, the IRS is understaffed, and there aren't enough employees to field the millions of calls made by taxpayers. The Treasury officials were quick to pin this on Republican lawmakers who have blocked efforts to boost funding to the agency. President Biden's Build Back Better plan calls for $80 billion to be invested into the IRS over 10 years, with the goal of improving customer service and enforcement.

What are the important dates to be aware of?

The IRS will start accepting and processing 2021 tax returns on Jan. 24. The tax filing deadline is April 18 — three days after the typical April 15 deadline, due to the Emancipation Day holiday in Washington, D.C. In Massachusetts and Maine, residents will have until April 19 to file their federal return, due to Patriots' Day being celebrated on April 18.

How will the advance child tax credit affect filings?

The American Rescue Plan that passed in March 2021 boosted the child tax credit to $3,000 per child under 17, plus an additional $600 for each child under six years old. This was temporary, and just for the 2021 tax year. Many families received their tax credits upfront, spread out across payments they received each month from June through December, while some opted to receive the full credit once they file their taxes for the year. In some cases, because of the credit boost, people who usually make too little to file a tax return will need to do so for 2021.

Those who received monthly payments will see their write-off reduced when they file, and some may end up owing money because of it. "That will certainly be a surprise to folks," Patrick Amey, a certified financial planner at Financial Advisory Service Inc., told CNBC. "And you're not going to know exactly where you fall until you actually file your taxes, given the complexity of the calculation." The IRS has started mailing out letters to recipients of the advance child tax credit, showing the amount of payments they received in 2021 and the number of qualifying children used to calculate those payments. Hold onto this letter, as it will help during tax filing preparations.

Is there any way to speed up the filing process?

Make sure you dot your i's and cross your t's. Before filing, triple check all information — if the IRS' system catches any possible errors, your return will have to be handled by an employee, which slows things down. The IRS is also encouraging people to file electronically and provide direct deposit information, as it takes longer to cut and mail a paper refund check. If you have any questions, check the agency's website first before calling — last year, the IRS received more than 240 million phone calls between January and June, and with fewer than 15,000 employees tasked with answering those calls, there were some long wait times. For those who qualify, there are free programs that can help with basic tax preparation: Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE).

How long will it take to get a refund?

The IRS says that if taxpayers file electronically, choose direct deposit, and don't run into any issues with their return, they should receive their refund within 21 days of filing.

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