What’s new and what to consider when filing in 2022

Most people generally only interact with the IRS when they file their individual income tax return, and certain people haven’t had to file returns in the past but need to now because of new stimulus and tax credit payments. This year it’s critically important to be well-informed and prepared, and we’re here to help.

Filing a 2021 tax return, even if you don’t have to, could put money in your pocket. While people with income under a certain amount aren’t generally required to file a tax return, those who qualify for certain tax credits or already paid some federal income tax by having taxes withheld from a paycheck may qualify for a tax refund available only by filing a return.

Electronic filing and direct deposit are the way to go for the fastest refund. Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year to avoid refund delays. If you need a tax refund quickly, do not file on paper – use software, a trusted tax professional or Free File on IRS.gov. For people with no issues with the tax return, the IRS anticipates most taxpayers will receive their refund within 21 days of when they file electronically if they choose direct deposit.

Reconcile advance Child Tax Credit payments. If you received advance payments, you need to file a 2021 tax return. You will need to compare the advance Child Tax Credit payments that you received with the amount of the Child Tax Credit that you can properly claim on your 2021 tax return. This includes people who successfully used the Non-Filer tool in 2021. In January 2022, the IRS will send you Letter 6419 with the total amount of advance Child Tax Credit payments that you received in 2021. To avoid a processing delay, you will need the total amount and should watch for your Letter 6419 from the IRS before you file. If you don’t have a letter or you have questions about the amount you received, you can see the total advance Child Tax Credit payment amount using your IRS Online Account. Please make sure you review this information closely. See Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return for more information.

Claim a Recovery Rebate Credit (stimulus payment). Individuals who didn’t qualify for the third Economic Impact Payment or did not receive the full amount may be eligible for the Recovery Rebate Credit based on their 2021 tax situation. Those eligible will need to file a 2021 tax return, even if they don’t usually file, to claim the Recovery Rebate Credit and they will need the total amount of their third Economic Impact Payment, including any supplemental or “plus-up” payments, to file their return accurately and avoid a processing delay that may delay their refund. In early 2022, the IRS will send out Letter 6475 to provide the total amount of the third Economic Impact Payments that individuals received. Individuals can also get this information by logging in to their IRS Online Account with their existing ID.me account or their IRS online account username to securely access their Economic Impact Payment amounts. For more information, see Recovery Rebate Credit.

The IRS saw many millions more errors on 2020 tax returns than in previous years, including those requiring special handling by an IRS employee, to correct the Recovery Rebate Credit amount. That’s why we’re highlighting how critical it is to have the total amount of the tax year 2021 third Economic Impact Payments and advance payments of the Child Tax Credit in addition to normal income documents.

What to do if your tax return from 2020 is still being processed. People whose tax returns from 2020 have not yet been processed can still file their 2021 tax returns. For anyone in this group filing electronically, here’s a critical point: taxpayers need their Adjusted Gross Income, or AGI, from their most recent tax return when they file electronically. For those waiting on their 2020 tax return to be processed, make sure you enter $0 (zero dollars) for last year’s AGI on the 2021 tax return.

Remember – unemployment compensation is taxable. Millions of Americans received unemployment compensation last year, and it’s fully taxable in 2021. The American Rescue Plan Act of 2021 allowed an exclusion of unemployment compensation of up to $10,200 for 2020 only. Remember for 2022, if no federal income tax is withheld from unemployment payments, it could mean an estimated tax payment should be made. For more information, review Tax Topic 418, Unemployment Compensation and Publication 525, Taxable and Nontaxable Income, on IRS.gov.