By Mary Gillum, Legal Aid Society
Tax Day is right around the corner, and some taxpayers who haven’t filed their returns might be getting anxious about getting them done in time.
If you’re among that group, here’s what you should know. The pandemic continues to affect conditions for taxpayers, making it more important than ever to file before Monday, April 18, and to make sure their returns are as error-free as possible. Those who received pandemic-related payments during 2021 also might have a few extra steps ahead of them to ensure they’re getting all the money they and their families are entitled to.
Here are a few areas for taxpayers to keep in mind as they prepare to file:
Later deadline: Last-minute tax filers will get a few extra days this year to get their returns submitted, with a deadline of April 18, instead of the usual April 15. If you’re still unable to file by the 18th, you should file an extension, which will prevent the IRS from assessing a late filing charge — although you’ll still have to pay interest and penalties on any taxes owed.
Child tax credits: Parents got a special financial boost last year thanks to the Biden administration’s expanded child tax credit, which provided advance payments to families through monthly checks from July through December. Parents were entitled to $250 per month for each child between ages 7 and 17 ($1,500 total), and $300 per month for each child up to age 6 ($1,800 total). These checks represent half of the total amount that parents are entitled to receive for 2021, with the remainder being distributed through their tax refund check.
However, in order to receive their remaining child tax credit — and verify that they received the correct amount in their previous checks — recipients will need to reconcile the credit on their returns using Letter 6419, which they should have already received in the mail. If you didn’t receive the full amount you believe you were entitled to, it’s possible to get the problem fixed by filing a Schedule 8812 form.
Economic Impact Payment errors: If you’re among the Americans who should have received the third Economic Impact Payment during 2021 but didn’t, or who received a smaller amount than you were entitled to, there’s a way to claim that missing money. File a tax return and use the 2021 Recovery Rebate Credit, even if you don’t expect to owe any taxes. The Recovery Rebate Credit money will either reduce your tax bill or be sent to you as part of your refund.
Filing your return on time can be especially important if you owe money to the IRS and are entitled to the Recovery Rebate Credit. Taxpayers who file by the deadline can receive the rebate credit without having it garnished to pay pre-existing federal tax debt. It’s still unclear if those who are late in filing will receive the same protection.
If you do request a Recovery Rebate Credit and the IRS denies your request, it’s important to appeal the decision in writing within 60 days, ideally with the help of an attorney or a tax expert. If you don’t appeal within that period, you might lose your right to have the matter heard in tax court.
Use a trusted tax preparer: Something most people may not realize is that in Tennessee, there are no legal prerequisites for doing tax preparation services. We’ve seen some unscrupulous companies, often used-car dealers or rent-to-own sellers, offer to do customers’ taxes as a promotional tool. But going that route can often leave a taxpayer at risk of audit because the preparer doesn’t have the expertise to do their taxes correctly. Generally, I recommend using a tax preparer that’s been in your community for a while and does that as their main business.
For those who have low to moderate income, are disabled, elderly or are not fluent English speakers, one free option I would suggest is Volunteer Income Tax Assistance (VITA). You can locate a VITA site near you by visiting the IRS website. Finally, if your income is $73,000 or less, you can file your federal tax return electronically for free using the IRS’ Free File program.
Earned income tax credit: If your earned income in 2021 was less than your earned income in 2019 and using the higher 2019 earned income would increase your earned income tax credit, you can use the 2019 earned income to determine your 2021 EITC. I’ve seen this increase a taxpayer’s refund by up to $2,000. If you use a paid tax preparer, make sure to take along your 2019 tax return when you meet with them. If you prepare your return using VITA, IRS Free File or any online tax company, have your 2019 return handy so you can input the 2019 earned income amount. The 2019 earned income is used solely for determining the EITC, not for taxation purposes.
Self-employed workers: Since the start of the pandemic, many Americans have left their full-time jobs for self-employment. When starting self-employment, it’s important to set aside a portion of your income for taxes, since it won’t be deducted from your paycheck automatically any more. You’ll also want to keep receipts of any expenses that are directly related to your business, such as office supplies, gas, office rent or electricity, because you’ll be able to deduct those from any taxes owed.
Be vigilant to avoid filing errors: The pandemic caused the IRS to fall behind on reviewing tax returns. Most tax returns mailed to the IRS after April 1, 2021, are still waiting to be processed. So make certain that the information you’re putting on your return is accurate, and seek qualified assistance if you’re stuck.
How Legal Aid Society can help
If you’re struggling with questions regarding your tax return, you can call Legal Aid Society’s toll-free tax hotline at 866-481-3669 to receive free advice. Low-income Middle Tennessee residents who qualify might also be able to receive legal assistance with matters concerning their taxes. Give us a call or visit www.las.org to see if we can help you.