IRS Updates and the Recovery Rebate Credit

To say that it’s been a chaotic couple of years at the IRS is a bit of an understatement. While many Americans have experienced frustration with the nation’s taxation agency due to a lack of timeliness or accessibility to have questions answered, it hasn’t been for lack of effort.

During the pandemic, the IRS was tasked with many new responsibilities that neither it nor any agency had ever handled throughout our country’s entire history. In addition to that little caveat, the agency wasn’t provided with extra resources or staff to handle the spike in activity.

While I’m not here singing the praises of the IRS, I am acknowledging that the backlog I spoke of in a recent post is not unreasonable or unexpected given the circumstances. Fortunately, it appears that’s going to be changing in the coming weeks and months, as the IRS has announced that they’re planning to hire 10,000 new employees.

In addition to this hiring spree, there are several topics about this tax season that, while they don’t warrant a full article of discussion, should be discussed, so you know what’s important when filing taxes.

I apologize in advance that this post will touch on multiple points instead of a single topic. I’m choosing this route because I want to highlight several taxation topics to give you an idea of what you should be considering when filing this year.

I’m not interested in stretching blurbs into articles and pretending I provided valuable information.

Let’s get to it.

What’s the News About the IRS Hiring Spree?

The IRS is planning to hire 10,000 new workers to meet the increased labor demands the agency is experiencing. In addition to 10,000 new workers, the agency will be hiring 2,000 independent contractors and putting together a 700 person team to deal specifically with 2021 tax filings.

This staffing shortage is not specific to the COVID crisis, only exacerbated by it. The IRS has maintained the same staffing levels it had during the 1970s despite an increasingly complex tax code and a substantial growth in population and number of filings. By any measure, it’s due time that the agency is staffed and funded at rates that allow it to keep pace with the workload it’s expected to handle.

Will the April 18th Tax Deadline Be Delayed?

As of now, no. According to IRS Commissioner Chuck Rettig, the deadline for filing taxes will remain April 18th. That said, with all the backlogs and potential that a taxpayer doesn’t have all the necessary documents to file their taxes, you can always file for an extension.

It’s important to remember that while an extension will give you an additional six months to file, it doesn’t change anything regardings payments due to the IRS. Put simply, the IRS will provide you with more time to get your papers together, but they want their tax payment in April as usual, even if it’s an estimated payment.

What is the Recovery Rebate Credit?

If you didn’t receive or qualify for the third stimulus payment, you might be entitled to a refund on your taxes. This also applies to instances where you were entitled to the first and second round of stimulus payments but, for whatever reason, didn’t receive them.

The amount of stimulus funds you received in 2021 should have been sent to your mail. The document is called Letter 6475, and this is something I discussed in the post on how to avoid getting your tax refund delayed. That’s worth a read if you haven’t already checked it out. 

I highly recommend reconciling or asking your accounting specialists to reconcile the information the IRS has with what money you actually received. During a unique couple of years for the IRS, many errors have been made, and you may be entitled to a nice reduction in taxes owed; this isn’t only my suggestion, the IRS suggests looking into it as well.

Odds and Ends About the 2022 Filing Season

First and foremost, the best method for doing your taxes is getting a tax professional to help you. While I understand that’s more than a little self-promotional, it also happens to be true, so it behooves me to mention that. Sharp, H&R Block, your family’s long-time accountant, that choice is yours to make, but I can promise that allowing a professional to handle the process will reduce your stress levels during tax season.

Second, file something. If something gets filed incorrectly, it can almost always be amended, but a failure to file can’t be undone or amended. Although it’s a route that many people have chosen to take at one point or another (I include myself in this group), it’s never a good plan to wait for the IRS to come to you; they tend to prefer you go to them. 

Third, if you’re among those who are still waiting on their 2020 taxes to be processed, make sure to put $0 as your adjusted gross income (AGI).

Fourth, unlike 2020 when there was an exclusion of unemployment income up to $10,200, this year’s filings provide no such benefit. If you received unemployment in 2021, it’s taxable income.

Fifth, if you’re a parent (or parents), look into how the child tax credit could affect your 2021 taxes.
I understand there’s a lot of information flying around, so if you want to double-check something about any of these topics, the IRS put together a good page regarding the 2022 tax season.