Any mistakes could mean refunds are held up indefinitely until the IRS can review forms by hand.
While many taxpayers will receive a larger child-tax credit than in previous years—up to $3,600 compared with $2,000, thanks to the pandemic-aid bill’s expansion of the benefit—only half of it is due in the form of refunds, because of the monthly payouts that ran from July through December 2021.
“Some people are not getting as much as they anticipated, and they aren’t understanding it.” Christina Brown, a Florida-based tax preparer, said. “I’m dreading telling clients that their refund is not as big this year.”
Taxpayers who have questions or problems will find it tough to get IRS answers. Agency representatives were only able to answer 11% of the 282 million incoming calls last year, according to a report this month from the Taxpayer Advocate Service.
This filing season is also likely to be tricky for many who started their own ventures last year. On the other side of the record quit rates seen in 2021 was a jump in the number of small businesses and self-employed taxpayers. A record 5.4 million new business applications were filed in 2021, an increase from the previous record of 4.4 million submitted in 2020, according to the U.S. Census Bureau.
That will add more pressure and complexity for people having to file taxes as business owners for the first time.
“When we look at our consumer trends data from the prior-year tax returns, what we saw was four to six times the number of clients taking unemployment, and starting their own side hustle or small business. And those both have substantial implications for the tax return and create a lot of uncertainty and need for help,” H&R Block’s Orosco said.
Businesses also have to be aware of all the tax laws and regulations that have changed.
Most notably, the employee retention credit, a tax perk designed to encourage businesses to keep employees on payroll, ended three months early in 2021—something Congress did to help pay for the infrastructure package enacted late last year.
“We have to educate ourselves as to what the tax rules are and help clients understand if they qualify or not, what it means to them,” Cannon said. “It’s not a fun situation for us either. I mean, the IRS is frustrated but I can tell you certainly, so are the tax preparers around the country.”
While returns are usually due April 15, this year that day falls on a Friday District of Columbia holiday, postponing the deadline to April 18 for most. Taxpayers in Maine and Massachusetts have until April 19 thanks to the Patriots’ Day holiday in those states.
This article was provided by Bloomberg News.