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Refund Scams - Did You Know?
As tax filing season ends and individuals start receiving their refunds, taxpayers should be aware of a refund scam that may be making the rounds.
The scammer starts by stealing taxpayer information through hacks, uses the stolen information to file a tax return, and then gets the refund deposited into the victim's account. They then contact the victim and pretend to be the IRS saying that it was a mistaken deposit and to return the money to them. The scammers may make threats for you to return the 'erroneous deposit' using a recorded call message, or pose as debt collection agency officials acting on behalf of the IRS.
The IRS has established procedures for taxpayers to follow in the genuine case of a mistaken refund that can be found here: https://www.irs.gov/taxtopics/tc161.
Possible Reasons for 2021 IRS Tax Refund Delays
Most taxpayers who file their returns electronically and request direct deposit generally receive their IRS refunds within 21 days. However, a variety of factors can result in longer return processing times. The IRS recently reminded taxpayers of the most common causes of tax refund delays, including:
- The return was mailed on paper instead of filed electronically. Filing a paper return typically doubles the expected wait time for a refund.
- The IRS needs more information to process the return. In this case, you will generally receive an IRS letter requesting the information.
- The return did not include banking information for direct deposit, so the IRS must mail a paper check.
- The return includes a request for an Injured Spouse refund allocation.
The IRS cannot provide information about refund status until at least 21 days after a return was electronically filed, or six weeks after a paper return was mailed.
IRS Where's My Refund Tool: https://www.irs.gov/refunds.
Filing Extensions and Minimizing Penalties – Did You Know?
Taxpayers who request an automatic extension to file their 2021 federal income tax returns may file anytime up until October 17th, 2022. Remember, however, that an IRS extension is only an extension to file tax returns, NOT an extension to pay any tax owed. Taxes not paid by the April 18th payment deadline may be subject to late penalties and interest charges.
Electronic payments may be made using the IRS online payment portal (link below). The IRS urges those who cannot pay what they owe at this time to pay whatever amount they can, and then apply for an installment plan to pay off the remaining balance.
You should still file your taxes, even if you can't pay, as the failure-to-file penalty may be 10 times more than the failure-to-pay penalty.
IRS Online Payment Portal: https://www.irs.gov/payments
Multiple IRS Deadlines Fall on April 18th – Important Reminders
2021 INDIVIDUAL FEDERAL TAX RETURN FILING: U.S. resident individual and joint tax filers, along with U.S. citizens must file 2021 Form 1040 or 1040-SR and pay any tax due. If you cannot file your return by the deadline, request an automatic filing extension to October 17th. However, if you expect to owe tax, estimate the amount and pay it by April 18th to avoid late payment penalties.
FIRST 2022 QUARTERLY ESTIMATED TAX PAYMENTS: If you earn income and either do not pay federal taxes through paycheck withholding or do not expect your withholding to cover your 2022 tax obligations, you may need to make quarterly estimated tax payments. In particular, this requirement applies to many self-employed taxpayers and “gig economy” workers. The first quarterly estimated payments for 2022 are due on April 18th, 2022.
DEADLINE FOR 2021 IRA AND HSA CONTRIBUTIONS: You may be able to treat contributions made by April 18th to your IRA or health savings account (HSA) as 2021 contributions, provided you have not reached your 2021 contribution limit.
2021 FEDERAL TAX AND 2022 ESTIMATED TAX DEADLINES FOR CORPORATIONS: Corporations must file their 2021 federal income tax returns and pay any tax due, and also make their first 2022 estimated income tax payments, by April 18th.
The IRS urges taxpayers who cannot pay the tax they owe to file by the April 18th deadline and pay what they can. By making a payment in any amount now and setting up a payment plan, you may be able to reduce penalties and interest charges.
Foreign Bank and Financial Accounts Reporting – Did You Know?
Taxpayers with foreign accounts, such as bank accounts or mutual funds, generally must disclose this information on their tax returns. In most cases, U.S. individuals, trusts, estates and businesses with foreign accounts that totaled over $10,000 any time in 2021 must also file a foreign bank accounts report, or FBAR by April 15, 2022.
The official name of the FBAR form is FinCEN Form 114, Report of Foreign Bank and Financial Accounts. FinCEN stands for the Financial Crimes Enforcement Network, a separate agency from the IRS. You must submit the FBAR directly to FinCEN – you cannot file it with your tax return. The standard FBAR filing deadline is April 15, although filers typically qualify for an automatic extension to October 15.
Tax Refund Myths – Did You Know?
There can be uncertainty around the timeline for receiving IRS tax refunds. Here are a few common questions related to these myths, along with real-world answers.
Q: Can I get a more accurate refund date by calling the IRS or my tax return preparer?
A: No. The IRS Where's My Refund online portal (link below) and the IRS2Go app provide the most accurate information available on the timeline for your tax refund.
Q: Can I find out my refund date by ordering a tax transcript from the IRS?
A: This popular myth is false. Use the Where's My Refund portal or IRS2Go app to get an estimated date for your refund.
Q: The Where's My Refund Portal or IRS2Go app does not show a refund deposit or mailing date. Does this mean that the system is not working?
A: Generally, if these sources cannot provide a refund date, it just means that the IRS has not finished processing your return. While the IRS issues most refunds within 21 days for electronically filed returns, processing can take longer for a variety of reasons.
Q: What does it mean if Where's My Refund shows a different refund amount than I expected?
A: Most likely, the IRS had to make an adjustment to your return. You will receive an official IRS or U.S. Treasury letter explaining any change to your refund amount.
Q: If I get a 2021 tax refund, does that mean my withholding amounts are correct for 2022?
A: Not necessarily. Regardless of your refund amount, it is always good to check the IRS Withholding Estimator Tool (link below) periodically to make sure you are staying on track.
IRS Where's My Refund portal: https://www.irs.gov/refunds
IRS Withholding Estimator tool: https://apps.irs.gov/app/tax-withholding-estimator
Federal Tax Extensions - Did You Know?
If you file for an extension on your federal income tax return, you have until Oct 15th, 2022 to file your taxes but you still have to pay any taxes due by April 18th, 2022. Bear in mind that this extension applies only to FILING your return; the payment due date will remain as April 18th. Failing to pay the full amount you owe by April 18th may result in late fees, interest or other penalties.
If you are a US citizen or green card holder living overseas, or active military on duty outside the United States on the regular due date of the return, you may be able to get an automatic two month extension to file your return and pay any taxes due.
Unclaimed 2018 IRS Refunds Deadline – Did You Know?
The IRS has issued a reminder that time is running out to claim your 2018 tax refund if you did not file a 2018 federal return. The deadline to file a 2018 IRS return and claim your refund is April 18, 2022. Filing a missed 2018 return may also qualify for the Earned Income Tax Credit (EITC) if you meet the requirements.
By law, there is a limited three year window to claim a refund. After that date, unclaimed 2018 federal tax refunds will become the property of the U.S. Treasury.
Reporting Cryptocurrency Transactions - Did You Know?
If you had any involvement with cryptocurrency or other virtual currencies in 2021, you generally must disclose this activity on your tax return. Form 1040 includes the question, “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”
Among other situations, you must check the “YES” box for the virtual currency question if any of the following occurred in 2021:
- You received cryptocurrency as payment for property, goods or services.
- You used cryptocurrency to pay for property, goods or services.
- You received cryptocurrency for mining or staking activities, or as the result of a “hard fork.”
- You purchased cryptocurrency through a trading platform or from another individual.
- You sold cryptocurrency for cash or exchanged it for another real or virtual currency.
- You gave away or received cryptocurrency in a transaction that did not qualify as a bona fide gift.
Because the IRS designates cryptocurrency as property, any cryptocurrency transaction could have tax impacts. If you received cryptocurrency as income, it should be reported just like you would if you had gotten the payment in cash. Other cryptocurrency transactions may involve a taxable capital gain. Capital gains must be reported separately from ordinary income, and may be taxed at different rates.
The U.S. Treasury has significantly stepped up enforcement of cryptocurrency tax rules since 2020, so the IRS urges all taxpayers to fully disclose their transactions. A tax professional can help you properly report your cryptocurrency activities, and figure any resulting income or capital gains tax.
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