Taxpayers, and by association their tax professionals, may face two major issues this post-tax season: IRS refund adjustments and estimated tax payments for the 2022 tax season.
The IRS is currently recalculating taxes on unemployment benefits for 2020 based on recent tax law passed during the 2021 tax season. The IRS began issuing refunds the week of May 14 to eligible taxpayers who paid taxes on 2020 unemployment compensation that was later excluded from taxable income due to the American Rescue Plan. Tax pros should confirm these recalculations were done correctly for their clients. In some instances, if a client did not originally claim the earned income credit or other credits, but is now eligible, an amended return will need to be filed.
The IRS will send taxpayers a notice explaining the corrections, which they should expect within 30 days of when the correction is made. Taxpayers should keep any notices they receive for their records. Taxpayers should review their return after receiving their IRS notice(s).
Corrections to any earned income credit (EIC) without qualifying children and the recovery rebate credit are being made automatically as part of this process. However, some taxpayers may be eligible for certain income-based tax credits not claimed on their original return, such as the EIC for their qualifying children. If so, they should file an amended tax return if the revised adjusted gross income amount makes them eligible for additional benefits.
Additionally, making estimated tax payments throughout the year prior to filing their return can help taxpayers reduce that end-of-season sticker shock some face when they realize they owe a significant amount of money (and avoid penalties and interest). Many taxpayers may be required to make estimated tax payments if their income is drastically different from prior years.
To help tax professionals with this post-tax season information, the National Association of Tax Professionals (NATP) is offering two completely free webinars that will detail these topics and help tax professionals determine what they can and should be doing now to help their clients.
Filing Form 1040-X After IRS Calculations — As the IRS recalculates taxes on unemployment benefits, it’s important for you to confirm that it was done correctly. For example, if your client did not originally claim the earned income credit or other credits, but is now eligible, you’ll need to file an amended return.
Calculating Estimated Tax Payments — With the economy opening back up, your client’s income may look drastically different from last year. There are tools available to you to help calculate estimated tax payments and minimize penalty abatement for your clients. We also discuss the new proposed legislation, Tax Deadline Simplification Act.
To learn more and register, visit natptax.com/help.
These webinars are available to anyone interested, not just NATP members.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.