Bloomberg News reports that millions of Americans are rushing to file their federal taxes for 2021 before the deadline expires. There are 19 million taxpayers that have requested an extension on the April deadline, which they have until October 17th, October 15th being a Saturday. This deadline has been granted to the taxpayers for submitting their documents, leading to a mad rush for the tax professionals and the accountants with the approach of the due date.
The last two years have been lenient for the pandemic, and the Internal Revenue Service has waived off penalties. However, it is back to normal, and the IRS has decided to impose fines on taxpayers that do not meet the deadline. In addition, the underpayments’ interest rate escalated from October 1st to 6%, up from 5%. It will cost even more if everything the taxpayer owes is not paid. All these add up to a different environment for taxes in the current year.
Paper Issues
Those who have been using the mail to file their tax returns are facing difficulty, which is now being treated as a thing of the past. According to Peppers, it is best to file online. It is also said that the IRS faces many difficulties due to paper backlogs. Towards May, around 21 million paper tax returns were still unprocessed. Many people have not received their refunds for 2019 and 2020 as the IRS struggles to recover from the disruptions during the pandemic.
Keep Penalties At Bay
The two most incurred fines might have to be shelled out to the IRS. These include failure-to-file and failure-to-pay penalties. While the former is incurred for nonsubmission of all documents, which accounts for 5% of the taxes not paid for every month that the taxpayer is late for, the second that failure-to-pay, is 0.5% of the tax owed after the expiration of the due date every month that the tax is unpaid, which is around 25%.
Plan Well
For those taxpayers that are willing to shell out a little more time on taxes, there are means by which they can pay less and enjoy more outstanding refunds in the current year and also in the future.
Bloomberg News reports that Green-Lewis says by paying close attention to child tax credits which were found to increase in 2021 to $3600 for the kids that qualify under the age group 6 and as much as $3000 for the remaining eligible children below age 18 years was up in the earlier years by as much as $2000.
If the third stimulus check in 2021 was not received, the same can be added to the filings and receive a recovery rebate credit.
