Every tax season has its own headaches. Let’s discuss some of the top tax issues of 2022.
Due to the COVID-19 pandemic, there are still millions of tax returns that were filed in 2021 (for tax year 2020) that the IRS has yet to finish working through. According to a recent NPR article, the agency is understaffed and underfunded. Things are moving slowly, but the IRS is implementing several new initiatives in the coming months that are supposed to help combat these issues.
It was a perfect storm for tax season 2022: the IRS understaffing issues meant long phone calls, often ending without getting through to the party you needed, the combination of unprocessed returns and refund requests from this year and last year, and more.
There were even several reports of businesses and individuals being contacted by the IRS to send in forms that were previously sent. And this backlog only further overburdened the IRS as the 2022 tax season progressed.
There is some light at the end of the IRS tunnel when it comes to the tax issues of 2022 – the agency is currently implementing several solutions that are aimed at supporting the larger volume of work and lower staff numbers through automated and e-filing channels.
To ensure that you get your 2022 and future filings back more quickly, the IRS recommends collecting and double-checking all documentation before you send it and switching to e-filing your taxes if you don’t already.
New Changes and EIP Amnesia
Other 2022 tax season issues include new tax code and COVID program-related changes, and, surprisingly, the fact that many people didn’t remember they received an Economic Impact Payment at the beginning of 2021.
It’s been a crazy year, and with all the regulations and restrictions often being extended or changed with just days left on deadlines, it’s easy to imagine how a single EIP could fly under your radar during the 2022 tax season.
Because of this EIP amnesia, many professional tax preparers spent time watching their clients search their bank accounts and histories to confirm that they did in fact get a stimulus payment last year. Moving into the next year, those pesky EIPs will no longer be part of the tax prep journey.
The confusion surrounding the Advanced Child Tax Credit, child and dependent care credits, and new requirements also created friction this year. Many did not understand that because it is a credit, their refund at the end of the tax season would be smaller than in previous years.
Uncertainties in Congress
The IRS backlog isn’t the only government-fueled headache of the 2022 tax season. There are several directions that Congress could tax our tax laws beyond this filing season and preparing for those changes is difficult.
The proposed Build Back Better Act has several components – including some surrounding Roth IRA and account conversions unpredictable – that could affect how and when we take certain financial steps in 2022 and beyond, and that is frustrating both tax preparers and their clients.
There is also some discussion being reported that talks of ending 1091 property tax exchanges. These exchanges allow you to swap one investment property for another, deferring capital gains taxes. Nothing has changed yet, but any number of legislative initiatives could shift the tax code for the future.
This uncertainty due to politics wasn’t always so up and down, though. In the past, the tax laws could be expected to change every ten years. Now, there’s a consistent possibility that the laws will change every two years, which creates more issues when tax time comes every year.
Many small businesses were hit with issues that stemmed from the volatility of their sales since the pandemic started over two years ago. In 2020, many small businesses were forced to pivot to online operations, implement socially distant or curbside business practices, or even shut down altogether.
But in the tax year 2021, many businesses saw bigger profits, and that surprised some of them when tax season came around. A bigger tax bill means good things for your business and income, but it’s also important to make sure you have enough cash flow to cover those bigger tax bills this year.
Start Easing the Tension of Tax Season 2023 Today
Whether you are tired of struggling through extended wait times due to the IRS backlog or you just want to get a head start on your organization for tax season 2023, eFile360 can help
From 1099s to 1098, ACA, and W-2 forms filing and organization, we are the most cost-effective e-filing service for your business. Our all-inclusive service starts at just $3.50 per recipient. You can enter your data manually or upload it using spreadsheet files. We also offer TIN checking and e-delivery.
eFile360 can help you make your 2023 taxes stress-free. Sign up for a free account today