5 issues to know as submission season kicks off
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This is an excerpt from the Personal Finance team’s weekly Twitter space, “This week, your wallet.” Watch the latest episode here and tune in every Friday at 11:00am ET.
Tax season started on January 23rd. The IRS expects taxpayers to file more than 168 million returns, most before the April 18 deadline.
Here are some important things to know before filing, according to CNBC’s Sharon Epperson, senior personal finance correspondent, and Kate Dore, a personal finance reporter.
1. Filing – and tax help – can be free
Certain taxpayers have free (and often underutilized) resources to help them file their tax returns.
The IRS Free File program offers free, guided, online tax preparation. The program, which is delivered through a public-private partnership, is available to taxpayers with an annual adjusted gross income of $73,000 or less.
Free File is available to 70% of taxpayers, but few use it — and they may inadvertently pay to file a tax return.
The IRS also offers fillable forms, which are electronic federal tax forms that you can fill out and file online for free. It’s essentially a pencil-and-paper option for DIYers.
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You may also be eligible for free tax help at a local volunteer tax help center, which is generally available to people with incomes of $60,000 or less, people with disabilities, or people with limited English. People over 60 can also get help from tax advice for older people.
You can find a VITA or TCE location near you on the IRS website.
2. When to file a tax return
In most cases, you should submit a claim as soon as possible – to receive a quicker refund and reduce the chances of an identity theft scammer demanding a refund on your behalf.
However, you must submit all relevant tax forms and they may not all be available yet. You can use last year’s tax return to get an idea of what forms you may need. They may be mailed to you or be available online. (Along with the tax forms, you should have receipts for relevant tax deductions and credits.)
If you owe a tax bill — and worry you don’t have the money to pay it right now — you can delay filing a tax return, usually until April 18. File a tax return at this time and pay at least a portion of your tax return for a Penalty Reduction Bill.
3. Timing and Amount of Tax Refund
In general, you should receive a refund within 21 days.
To avoid delays, file an electronic, error-free direct deposit tax return for payments. Do not send a paper return or request a refund check.
Double check your return for important details and basic errors such as typos in your name, address, date of birth, bank details and social security number. Errors can delay refunds.
The IRS has warned that tax refunds may be smaller this year. Pandemic-era tax breaks — such as improvements to the child tax credit, child and dependent care tax credit, and earned income tax credit — are no longer available.
4. What to do with a tax refund?
It may be wise to save — not spend — your refund this year. In an environment of economic uncertainty, having a larger financial cushion is important.
Taxpayers can make about 3% to 4% of that money through an online bank that offers a high-yield savings account. They may also wish to contribute to a pre-tax or individual Roth retirement account.
5. Seamless customer service
Those with tax questions may experience smoother IRS customer service this year compared to the recent past.
The Anti-Inflation Act increased funding for the agency, which has begun rolling out changes like hiring 5,000 new customer service agents and new technology that will allow people to respond to some communications online.
Last year only 13% of callers got through to a representative. The IRS hopes to reduce phone wait time to 15 minutes.
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