It is said that the only two certainties in life are death and taxes. Thankfully, one of these only occurs once in a lifetime. Tax season officially began Jan. 24. It culminates on Tax Day, which falls on April 18 this year.
The often-complicated process of filing taxes has become much easier. Software such as TurboTax and trusted accounting advisors are here to help. Louis Henry, of Tax Starz of Tampa Bay, has run this business for more than six years and worked in the field for much longer. Managing over 1,000 individual filers and 150 local small businesses, Henry has more than his fair share of industry expertise.
This year may be particularly difficult for filing. The remnants of the COVID-19 pandemic have left the IRS backed up. Many people have yet to receive their tax returns from the previous year. Henry offered some simple, yet overlooked advice to eliminate complications this year:
“Look out for typos. Make sure to proofread,” Henry said. “Any typo in a name or social security number causes a rejection.”
A seemingly small mistake in one of these fields could set filers back several months.
Another of Henry’s recommendations relates to the effects of the advance child tax credits sent out last summer under President Biden’s American Rescue Plan Act of 2021.
“It’s very important that the same dependents are claimed on the same return. Wrong figures could mean the return is held onto for months.”
Letter 6419, which outlines this credit, is a key document to hold onto for filing this year. These letters, which were sent out beginning in December, are reminders that the money received in advance last year must be reconciled with their financial information this year. In this case, a Schedule 8812 must be filed.
Since many people saw their incomes slashed starting 2020 from the effects of the coronavirus, larger refunds may be issued when using this previous year’s amount.
“The Earned Income Credit, or EIC, can use your 2019 earned income amount due to the COVID-19 pandemic for this year only,” Henry said. “I just went through this on a recent appointment for a client, and they’re seeing their refund increased by three or four thousand dollars.”
Of course, each situation is unique, but Henry’s advice underscores an incentive that filers may not be aware of.
Other oft-forgotten contributions include IRAs, rental income and interest and dividend income.
New in recent years are cryptocurrencies, a revolutionary alternative to traditional money. For many, cryptocurrency raises a large question mark when it comes to filing taxes. Earning income from popular ones such as Bitcoin are subject to traditional tax laws. Larger cryptocurrency trading sites, such as Robinhood, prepare statements for cryptocurrency. However, these are generally the exception. Most require a manual, personal audit.
No significant changes to tax laws take effect this year. The last major reform was the Tax Cuts and Jobs Act signed into law by President Trump in 2017. Those benefits will remain in place until 2025.
Although tax season usually ranks lower on the list than holiday season or football season, its yearly occurrence, while inevitable, does not have to be difficult. With help from experts like Henry, consider worries around tax season deducted.
By Ryan Walsh / Photos By Jensen Taylor
