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Everything You Need to Know About Filing Your 2021 Tax Return

There are lots of reasons to look forward to springtime: warmer weather, no more snow, March Madness and opening day for baseball are a few. But there’s one thing about spring that most people don’t look forward to: filing their income tax return.

This year, “tax day” falls on Monday, April 18, instead of the traditional April 15, which lands on a Friday. Here are a few other important things to keep in mind when it comes to filing your 2021 income tax return this spring.

1. Tax filing season is now underway. The 2021 tax filing season started on January 24, 2022. This was the first day that the IRS began accepting and processing returns for tax year 2021. So if you’re an early bird, you can file your tax return now if you’re ready.

According to the IRS, the January 24 start date gives the agency time to do critical programming and testing to make sure eligible taxpayers can claim the correct amount of Child Tax Credit as well as any remaining stimulus money they might be entitled to as a Recovery Rebate Credit.

2. You can get your tax refund faster by filing electronically. When you file your return electronically and choose direct deposit, you will usually receive your refund in one to three weeks. This compares to six to eight weeks for paper returns mailed into the IRS and electronically filed returns with a requested paper check refund. According to the IRS, more than 90 percent of refunds are issued within three weeks.

3. You can get an automatic filing extension if you need it. If for some reason you won’t be able to file your tax return by April 18, you can get an automatic six-month filing extension with no questions asked. Simply fill out and submit IRS Form 4868 before April 18 — this will push your tax filing deadline out to October 17, 2022. The form can be submitted online using IRS e-file or you can print it out and mail it to the address listed on the form.

There is no penalty for filing for an extension. However, if you owe tax to the IRS, you do not receive an extension to pay this tax. Any tax due to the IRS must be paid by April 18 even if you get an extension and don’t file your return until later. You can estimate your tax liability on Form 4868 and indicate how much you will pay.

4. You could pay penalties and interest if you miss the deadline and don’t file for an extension. If you’re getting a tax refund, file late and don’t get an extension, don’t worry — there are no consequences, other than having to wait longer to receive your refund.

But if you owe tax and don’t file for an extension, you could face a double-whammy: a late charge for not filing your return on time and another late charge for not paying your taxes on time. The failure to file penalty is 5% of the unpaid tax per month (plus interest) up to a maximum penalty of 25% of the unpaid tax. The failure to pay penalty is 0.5% per month of the unpaid tax until it is paid in full (plus interest) up to a maximum penalty of 25% of the unpaid tax.

5. You don’t have to panic if you can’t afford to pay your tax. The IRS provides several different options if you don’t have enough money to pay the tax you owe. The first is to pay using a credit card. The IRS uses several different payment processors to accept credit card payments, but keep in mind that these processors may charge a fee.

A better option might be to request an installment payment plan. If you’re approved, this plan will likely feature a lower interest rate than a credit card. To request an installment plan from the IRS, attach IRS Form 9465 to your tax return when you file. Note that the IRS charges an initial fee to set up the plan.

A final option is to ask the IRS for an Offer in Compromise. In some situations, the IRS will lower the amount of tax that’s due. These include if there’s any doubt about the accuracy of the amount due, if the IRS believes that the amount due could never realistically be paid, or if the IRS decides that payment would result in an economic hardship. Complete IRS Form 656 to request an Offer in Compromise.

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