As the tax filing season for 2022 gets underway, a stretched-thin Internal Revenue Service has already warned taxpayers that they should be patient as it processes their returns.
However, according to a recent survey, many taxpayers, particularly parents, are already feeling pessimistic about their upcoming experience this tax season before it has even begun.
More than half of those who took part in a YouGov/Forbes Advisor poll of 1,200 Americans believe their tax refund will be reduced this year as a result of pandemic relief programs.
As for the lowest-income households (those earning less than $50,000), only 42 percent expect to receive a refund, despite the fact that 77 percent of individual taxpayers received a refund last year.
According to Laura Scherler, senior director of economic mobility and corporate solutions at United Way, much of the uncertainty among taxpayers stems from the inability to claim pandemic aid, such as the expanded child tax credit, which was recently expanded.
According to Scherler, many people find filing a tax return to be confusing and stressful, and it causes them a great deal of anxiety. “It’s usually because [taxpayers] are afraid of making a mistake,” says the author.
Many people are concerned about being caught with their pants down on the back end—”What if I make an error and end up with an enormous debt that I can’t pay?” says one expert.
Here’s what Americans are stressing about as they gather their documents and prepare to file their federal income tax returns for the year 2021—and what you can do if you’re feeling stressed about your return.
Households with children can anticipate smaller refunds.
According to the results of the YouGov/Forbes Advisor survey, 38 percent of parents or guardians of children under the age of 18 anticipate that their refund will be lower than last year’s.
It’s possible that this is due to the American Rescue Plan Act, which increased the child tax credit for the 2021 tax year and made it available in monthly installments for the first time in 2021, as explained above. It is expected that 35 million households will receive their first round of monthly payments in July 2021.
In addition, the law increased the value of the credit per child by up to $1,600 for some families, and it was made fully refundable. There is a maximum credit of $3,000 per child between the ages of 6 and 17 and $3,600 per child under the age of 6.
When asked about the impact of the expanded child tax credit (CTC), 54 percent of respondents with children under the age of 18 living at home stated that they expect their refund to be lower because they took monthly payments for the second half of 2021, according to the survey.
Twenty-seven percent of respondents were unsure whether the monthly payments would have an impact on their refund.
Despite the fact that it is still early in tax season, it is not immediately clear how the monthly CTC payments will affect tax refunds—but for some families, it may result in a lower refund than what they are currently accustomed to receiving.
According to Scherler, if it wasn’t immediately clear to people that the CTC was essentially an advance on the credit they would receive when they filed their taxes, they may be surprised when that credit is reduced. This is because the credit was distributed outside of tax season, and taxpayers may not associate the monthly payments with their tax returns.
The possibility of income fluctuations in 2021, which could affect CTC eligibility, may also be a source of concern for some taxpayers, according to Alton Bell II, principal accountant at Bell Tax Accountants & Advisors.
However, the expanded credit includes a “safe harbor” provision for certain income levels, which means that if you receive an overpayment, you will not be required to repay that portion of the credit. It is customary for single filers to have an income of $40,000 and joint filers to have an income of $60,000.
Americans with the lowest incomes are pessimistic about refunds.
The majority of Americans with household incomes under $50,000 do not expect to receive a refund this year or are unsure whether they will receive one at all. Households with lower incomes, on the other hand, are more likely to benefit from increased tax credits, such as the child tax credit.
Employment volatility for workers in lower-paying roles last year, such as layoffs or furloughs, or hourly reductions, says Scherler, may have led to some taxpayers anticipating a smaller refund this year.
“They might be under the impression that because they don’t work as much, they won’t be entitled to as large a refund,” she explains. “Generally speaking, the inverse is true: if you work fewer hours and earn less money, you’ll be in a lower tax bracket, which means you’ll owe less money.”
In addition to the CTC, the Earned Income Tax Credit (EITC) has been expanded for the 2021 tax year to include low-income working adults as young as 19 and as old as 65, rather than restricting the credit to childless workers aged 25 to 65 as was previously the case.
When it comes to qualifying taxpayers with no children, the maximum EITC has increased from $543 to $1,502, and when it comes to qualifying taxpayers with three or more children, the maximum credit is $6,728. The credit is fully refundable in its entirety.
These tax credits are some of the most well-known anti-poverty programs in the country, and the temporary expansions have shown signs of boosting the morale of many Americans who are suffering from the Covid-19 pandemic in its later stages.
According to a report released in November by the Financial Health Network, households that had previously struggled to put enough food on the table increased their spending on food after receiving child tax credit payments.
After receiving payments, recipients who were having difficulty paying for health care spent more on their health-care needs, particularly on medication and prescription drugs, than they did before receiving payments.
Parents are concerned that filing taxes will be more difficult this year.
Overall, one out of every five people surveyed believes that federal assistance programs related to the pandemic will make the process of preparing and filing their taxes more difficult this year than it was last year.
Parents and guardians of children under the age of 18 are more likely than the general population to believe that the process of preparing and filing their taxes will be more difficult this year as a result of pandemic aid programs such as the expanded child tax credit.
While this is higher than the overall response rate (19 percent expect pandemic aid programs to make taxes more difficult), it represents an improvement over the previous year, perhaps indicating that Americans have become more accustomed to the additional complications to their tax returns as time has passed.
Nearly 40% of Americans predicted that preparing and filing taxes would be more difficult in 2021 as a result of receiving stimulus checks, among other pandemic-driven changes.
Three Pointers to Help You Get Through Tax Season
The Internal Revenue Service reminds taxpayers, particularly those who file paper returns, that they should expect delays during this tax-filing season.
Meanwhile, the IRS is working its way through a large backlog of tax returns from previous tax seasons. Here are some pointers on how to get through the most difficult tax season possible.
1. Submit your tax return by February 15th, if possible.
If you’re anxious to receive your anticipated refund, you should file your tax return as soon as possible, preferably before February 15. While the IRS processes most tax returns immediately after they are filed, CTC and EITC refunds will not be issued until the middle of February for taxpayers who qualify for them.
The Internal Revenue Service (IRS) encourages taxpayers to file their tax returns as soon as possible to avoid giving fraudsters any opportunity to file a tax return (and potentially receive a refund) in your name. It may also provide you with a sense of security when you hear warnings about delays.
The IRS reported that “a large number of taxpayers experienced delays with their tax returns or knew of someone who did,” according to Bell. “Now that tax season is back in full swing, I’m hearing a lot of echoes of last year from clients and taxpayers,” says the accountant.
Bell also advises taxpayers to get organized in order to ensure that they have all of the documents and information they need in order to file a tax return accurately. Due to potential inaccuracies, your return may be subjected to a manual review, resulting in extended processing time.
To find out what information you need to include on your tax return and how much you received in a stimulus check or child tax credit payments, create an account with the Internal Revenue Service (IRS) through their website.
You can use this feature to access certain tax forms, check payment balances, set up payment arrangements, and view prior-year tax returns, among other things.
2. If you’ve been a non-filer for several years, file a tax return anyway.
Because your income is too low, Scherler recommends that you file a tax return even if you are not required to do so by law. This will make it easier to access future benefits that may be sent automatically to people with information on file with the IRS, such as CTC payments or the stimulus payments scheduled for 2020 and 2021, if you have this information on file.
The filing of a tax return is beneficial because it allows you to gain easier access to monetary programs that you are eligible for — “and there are free ways to do that,” Scherler adds.
3. Seek assistance (it’s completely free!)
While the Internal Revenue Service has requested that taxpayers refrain from contacting the agency for information and assistance, there are numerous free resources available to assist you in preparing and filing your tax return.
In-person tax preparation assistance is available through the Volunteer Income Tax Assistance (VITA) program and the AARP Foundation Tax-Aide program. Alternatively, you may be able to schedule an appointment to complete your return virtually or over the phone.
The MyFreeTaxes portal, operated by United Way, provides free tax returns for both federal and state taxes in both English and Spanish.
Taxpayers with an adjusted gross income of $73,000 or less are eligible to use the IRS Free File program, which provides guided online preparation assistance.