Jill On Money: The IRS is your friend
Anyone who is considering a life change needs to contemplate the tax implications of doing so
Tax season is officially open and to prepare, the IRS has a warning: DO NOT expect refunds to be quite so generous this year.
The average tax refund for the 2022 filing season (through the end of October) was $3,176 — a 13.8% jump from the prior year average refund of $2,791 and a sizable increase from the pre-pandemic year of 2019, which was $2,869.
The reason for the early warning is that many of the COVID-19 relief measures stopped last year. There were no Federal or state stimulus recovery rebates or credits; no enhanced child or dependent care tax credits; and no charitable deductions for standard filers. As these emergency programs go away, you will likely find that much of your tax preparation for tax year 2022 will look a lot like your prep for the 2019 tax year.
That said, there are still some pandemic-era issues that the IRS needs to address.
According to the Taxpayer Advocate’s 2022 Annual Report to Congress, taxpayers and tax professionals “experienced more misery in 2022” due to paper processing delays and poor customer service.
But the report also says the IRS made considerable progress in reducing the volume of unprocessed tax returns and correspondence and is poised to start the 2023 filing season in a stronger position, after greatly reducing backlogs of paper returns and starting to increase staffing.
The opening of tax season is a good reminder of some basic facts:
Tax filing deadline
The deadline is April 18, due to observance of Emancipation Day in the District of Columbia. April 18 is also the due date to file for an extension, which gives you until October 17.
IRS Free File
Open to taxpayers with Adjusted Gross Income (AGI) of $73,000 or less in 2022. Free File lets you file your federal taxes at no extra cost either through electronic fillable forms or through IRS partnerships with private tax preparation services.
Avoid delays, file electronically
Paper = Problems. File electronically and use direct deposit and you will avoid the headache of a delay. If you are due a refund, then you will likely receive it within 21 days of filing electronically.
Don’t call the IRS
The IRS received 173 million calls during FY 2022. Only 22 million (13%, or roughly one out of eight calls) got through to an IRS employee. As a result, most callers could not get answers to their tax-law questions, receive help with their account problems, or speak with an employee about compliance notices. Those who got through waited an average of 29 minutes on hold before the call began.
The IRS is your friend…really!
In my book, The Great Money Reset, I stress that anyone who is considering a life change needs to contemplate the tax implications of doing so.
“What we might not fully appreciate is how life or career changes might create opportunities for us to save money or at least achieve more certainty about our tax burdens. The money you save or the certainty you gain might make a Great Money Reset more practicable.
“You might be able to retire earlier, take a job that pays less, or enjoy a higher quality of life in the years ahead — all because you understood what the tax law allows and took advantage of it. The IRS very well can be your friend during a major money reset, but only if you know what to do.”
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.