What Is Tax Season And How To Prepare For Your 2022 Tax Return

Tax season can cause a lot of headaches for many business owners — but fear not! This article will provide you with all the details you need so you will feel prepared as you tackle this year’s tax season. We’ll also answer the most frequently asked questions about the 2022 tax season and give you some bonus tips to help you get through this time of year with ease.  

What is tax season? 

Tax season refers to the period when most individuals are required to file and submit their tax returns. A tax season typically runs from January 1st to April 15th every year, though it can vary from year to year.

For example, the 2018 tax season started on January 28th, 2019, and ended on April 15th, 2019 (with a few exceptions for state holidays). Meanwhile, the 2020 tax filing season also started on January 28th but ended on July 15th, 2020, as the IRS decided to extend the deadline in response to the COVID-19 outbreak. 

Any tax returns submitted after the end of tax season are subject to late penalty fees and interest charges. That’s why, if you require a later deadline for any reason, you should always contact the IRS beforehand to request a temporary delay. 

During tax season, in addition to filing their own taxes, business owners must provide tax documents to their employees, contract laborers, and others, such as royalty earners, detailing the information needed to complete an individual’s tax returns. 

See also: How To File Taxes For The First Time: A Complete Guide To All Your Questions.

2022 Tax Season FAQ

1. When will I be able to file my 2021 taxes? 

According to the IRS, you can start filing and submitting your 2021 taxes on January 24th, 2022, at the earliest. 

If your income was $73,000 or less in 2021, you can file your taxes for free through the Internal Revenue Service (IRS) Free File program

2. What’s the deadline for filing my 2021 tax return with the IRS?

The deadline for most taxpayers to file federal taxes is April 18th, 2022  because this year, April 15th is Emancipation Day, a federal holiday. 

Taxpayers in Maine and Massachusetts have until April 19th to file their returns as both states recognize Patriots’ Day.

3. Can I request an extension?  

Yes. You can request an extension by filing Form 4868 by April 18th, 2022. Taxpayers who request an extension will have until October 17th, 2022, to file their 2021 tax returns. 

Remember that a filing extension does not extend the time you have to pay the IRS. To avoid late penalties, you must pay an estimated amount of what you owe by April 18th (or April 19th, depending on where you live). An extension simply extends the time you have to complete your paperwork and finish your tax return.

See also: Understanding the IRS’s Tax Underpayment Penalty and How to Avoid It.

4. When will I get my tax refund? 

You can get your tax refund within 21 days if you file electronically, file correctly according to the IRS’s criteria, and choose direct deposit. The IRS strongly advises against filing your taxes on paper as the process takes longer, which may delay the time it takes to issue your refund. 

See also: What Is A Tax Write-Off? 5 Most Common Write-Offs For Small Businesses

5. How can I keep track of my tax refund?

You can check the status of your refund directly on the IRS website IRS.gov/refunds or use the smartphone app IRS2Go

Your refund status will appear on your account within 24 hours after the IRS receives your e-file return or four weeks after you’ve mailed a paper return. If your status is ‘received,’ the IRS has received your return and is processing it. If your status says ‘approved,’ it means your tax refund is on its way.

6. How should I enter my AGI when filing my 2021 tax return electronically if the IRS hasn’t processed my prior return?

When you file electronically, you will be asked about your previous year’s adjusted gross income, or AGI.

If your 2020 tax return hasn’t been completed yet, the IRS recommends entering $0 for your prior-year AGI. Enter $1 as your prior-year AGI if you used the non-filers tool to register for an advance child tax credit payment or the third stimulus payment last year.

See also: When Uncle Sam Screws Up: What to do if the IRS loses your refund.

Tax season 2022 with Shoeboxed

Bonus tips to get through a tax season peacefully 

Here are some useful tips that you can use to lower taxes, save money and avoid tax penalties. 

1. Always be aware of the deadlines

Make sure you write down all of the important tax-related dates on a checklist and set reminders on your phone or Google calendar to get your taxes filed and submitted on time. Here is an example:

  • January 24: First day you can file federal tax returns
  • January 31: Deadline for employers to give employees Form W-2 for filing
  • April 18: Last day to file your 2021 tax return, request an extension, and pay taxes owed
  • April 19: Last day to file your 2021 tax return, request an extension, and pay taxes owed for Massachusetts and Maine residents
  • October 17: Due date to file if you request and are granted an extension

If you file and pay late, you will be required to pay a late-filing penalty of 4.5% per month of the tax owed and a late-payment penalty of 0.5% per month of the tax due. The highest penalty for late filing is 22.5%, while the maximum penalty for late payment is 25%.

2. Have all records readily available  

Make sure you have the necessary supporting documents and records for all claims on your tax return including, but not exclusive to: W-2s, 1099s, receipts, canceled checks, and others. We recommend having a well-organized system that keeps all important information together, and Shoeboxed can help you do just that. Shoeboxed is a software program that quickly and efficiently digitizes your receipts and documents. It automatically extracts and categorizes important data from your receipts, then stores them securely in the cloud. Most importantly, scanned documents from Shoeboxed are legibly accepted by the IRS. Get your records organized and stored with Shoeboxed to ensure you don’t have to pay any more tax than necessary! 

Final thoughts 

Understanding the ins and outs of tax season will help you be better prepared for this important period of time. Keep all the important dates top of mind and have all your documents ready to make your tax returns process easier and more efficient. 

Try Shoeboxed for FREE today!

3 Simple Steps to Get Through the Last Month Before Taxes Are Due

We went ahead to compile a list of a few tips which can come in handy as we enter the “oh-I-still-need-to-finish-filing” phase of the tax season.

Tax season is here and most of us are stressing out and trying to get our act together before the April 18 deadline.

Individuals and small businesses like you have found their way to productivity by eliminating paperwork in their day-to-day transactions and quite often, we hear from them about how they tackle the tax season and paperwork woes.

The insights we have gathered from them are simple and effective, with staying paperless and well-organized being the regular takeaway. We went ahead to compile a list of a few such tips which can come in handy as we enter the “oh-I-still-need-to-finish-filing” phase of the tax season (we know you already have a lot of lists to deal with this tax season, so we promise to keep this short).

1. Let D-Day stay on top of your mind

In the rush of work, it’s easy to lose track of time and days. One fine morning when you wake up, all that you are left with are few more days ’till you hit the deadline. To save yourself from the hopeless scramble that ensues, start early.

Make a list of what needs to be done (however small the activity is) and span it across the limited time that you have at hand. Once you have charted this out, the only thing you need to do is to stick to it and not procrastinate.

2. Compile all the required documents

One of the biggest reasons for stress during tax time is not finding your relevant documents in time and sometimes even forgetting to take them into account. To avoid this, the first step of your list needs to be putting together all of the documents.

Look for all of those receipts, investment documents and other records you need for tax filing and consolidate them in one central location. If you are not able to do this in one go, spread this activity across few days and a weekend. Starting off slow when you have enough time is better than doing things in a jiffy right when you wake up to the deadline.

3. Start the e-filing process!

In case you have been filing taxes on your own, after step 2 you are all set to start your e-filing process. And if not, get in touch with a tax preparer to sail through the tax filing process.

The latest guidelines issued by IRS has brought Form 8878 and Form 8879 (Electronic Return Originator authorization forms for individual taxpayers) under the scope of electronic signatures. For the uninitiated, Form 8879 is an IRS e-file signature authorization form that authorizes an ERO to enter the taxpayers’ PINs on individual income tax returns. Form 8878 is an IRS e-file authorization form for application of extension of time to file taxes, that authorizes an ERO to enter the taxpayers’ PINs on Forms 4868 and 2350.

Before, when going by the ERO method, taxpayers had to physically sign these authorization forms either in the ERO’s office or sign the physical copy and send it via mail or fax. But with the recent e-signature guidance, you can now authorize your EROs even remotely by choosing to electronically sign your authorization documents and simply e-mailing them to their tax preparer. (Yes, this method is IRS compliant.)

This not only makes e-filing process hassle-free, quick, and smooth, but it also saves a bit of your money too, which you would otherwise end up spending getting your authorization forms mailed to the ERO.

Using SignEasy to help with e-filing:

All set to get going with eSignatures? Click here to get started with signing documents online for free with SignEasy. SignEasy is also offering an exclusive 30% discount if you upgrade to SignEasy Pro. Use the discount code SHOEBOXED while making the purchase and get unlimited documents to sign, cloud integration, advanced security and much more. Please note the discount can be availed only through purchasing via the web.

Amrita Premrajan is Content Strategist and Marketer at SignEasy. Featured by Google, Apple and loved by 3.5 million users, SignEasy is a cloud-based solution to sign and fill documents from smartphones, tablets and web. SignEasy helps individuals and businesses reduce turnaround times, close deals faster and cut costs by eliminating the cycle of printing, scanning and faxing of paperwork.

A 5-Step Guide to Manageable Tax Prep for Entrepreneurs

Not only are taxes time consuming, confusing, and a nuisance, but they can also be a drain on your wallet if you don’t prepare well. This is especially true for entrepreneurs who, aside from having to deal with the complicated tax filing process of running a business, also have to actually run the business.

If there’s one thing all entrepreneurs can agree on, it’s that they dread tax season.

In fact, a recent survey by the National Association of Small Business (NSBA) reveals that 38 percent of small businesses reported they spent more than 80 hours a year dealing with federal taxes. That’s two whole workweeks! That same survey found that almost 50% of small businesses spend $5,000 or more annually on the accounting process alone—before paying their taxes!

Not only are taxes time consuming, confusing, and a nuisance, but they can also be a drain on your wallet if you don’t prepare well. This is especially true for entrepreneurs who, aside from having to deal with the complicated tax filing process of running a business, also have to actually run the business.
Whether you choose to do taxes on your own or hire an accountant this year, here’s a quick guide on how to knock tax season out of the park:

1. Familiarize Yourself With the Lingo

One thing we shouldn’t complain to the IRS about is the amount of tax breaks they offer. Tax breaks give small business owners and freelancers a great opportunity to win back some of that money they’ve been spending on their business, and it’s a unique way to encourage entrepreneurship.

However, there is a small caveat to this: it’s hard to keep track of what’s what. There are important differences between deductibles, refundable credits, and non-refundable credits. Each can help you in distinctive ways, so it’s useful to know which expenses qualify for which tax break as you track your finances throughout the year. Investopedia and the IRS website are helpful tools that can break down tax vocabulary into simple terms.
 

Deductibles

Benefits: Lowers taxable income and total tax liability. Can help with items that represent reductions in ability to pay tax (i.e. casualty losses).
What Does That Mean: Because deductions cannot reduce taxable income below zero, their value is limited to the filer’s tax liability before applying the deduction. Value depends on the taxpayer’s marginal tax rate, which rises with income.
Examples: Health care expenses, mortgages, car loans, investment-related expenses
 

Refundable Credits

Benefits: Decreases a person’s tax liability. Same value for all taxpayers with tax liability at least equal to the credit.
What Does That Mean: Treated as payments of tax you made during the tax year. When total of credits is great than total tax owed, you get a refund for the difference. Credits are more appropriate for subsidies provided through the tax system.
Example: Earned Income Credit, Additional Child credit, Small Business Health care credit.
 

Non-Refundable Credits

Benefit: Lower tax limit as low as it can go. Represents the majority of credits.
What Does That Mean: Credit cannot be used to increase tax refund or to create a tax refund when you wouldn’t already have one. Savings cannot exceed amount of tax you owe.Example: If you only owe $200 in taxes, and the only credit you’re eligible is for $500, the $300 difference is non-refundable.
Example: Child and Dependent Care Expenses credit, Saver’s tax credit, Adoption tax credit, Foreign tax credit.
 

2. Don’t procrastinate

Unless you want to have a very stressful week, don’t wait until right before April 18 (note – usually tax day is April 15) to prep and file your taxes! Last year, the IRS reported that 28% of Americans waited until the last few weeks before tax day to file their return. Sure, you can file for an extension if you can’t make it before the IRS deadline, but there are drawbacks to this, like late fees. And, just because you file late doesn’t mean you get extra time to pay taxes if you owe the government money.

Plus, when you take your time to carefully approach a tax filing, it won’t seem as stressful or time consuming. You’re more likely to make an error or miss out on a deduction if you rush the process.
 

3. Stay organized

By far, the easiest way to minimize the hassle of tax season is by staying organized and keeping updated records of receipts, payments, and expenses. The IRS demands documented proof for claims, so having everything stored and accessible can reduce a substantial amount of time and pressure.

Organization also helps maximize deductions and reimbursements without the hassle of scrambling to find misplaced financial records. It also makes it possible to file taxes at the earliest possible time because paperwork is readily available at your fingertips.

Shoeboxed’s mission is to streamline this process so that you can focus on more important things during tax season, like running your business or taking care of your family. We process and organize your receipts so that vendor, total amount, date and payment type are extracted and available in a searchable online account—without you ever having to lift a finger. You can also tag receipts as reimbursable or deductible so when you file taxes, your documents are already catalogued appropriately.
 

4. Stay informed

There’s a lot to swallow these days when it comes to tax codes, especially since the IRS makes changes on a yearly (and sometimes, even seasonal) basis. It doesn’t hurt to take some time researching professional blogs and news sites that can keep you informed on the latest tax changes. The extra initiative will take a few hours of time on your end, yes, but not nearly as much time it would take to prep taxes with little to no knowledge on how to maximize returns. This is especially helpful for entrepreneurs who do not have their own accountant.

Without a guiding hand, it’s easy to make misinformed decisions with tricky nuances (like filing status, for example). Some helpful sites that give excellent pro advice are Don’t Mess With Taxes, TaxGirl and AICPA.
 

5. When in doubt, ask a pro 

With an endless supply of information, the Internet of things can answer any question you may have related to taxes. Sometimes though, having 10+ pages pulled up with an overwhelming amount of information can make material difficult to digest. If your questions are very intricate and situational, it may be best to approach a tax expert or CPA. Examples of these questions may include:

  • Do I have a limit for my charitable contributions?
  • Should I itemize deductions? How in-depth?
  • When should I contribute to an IRA?
  • Should I file jointly, as single, or as head of household?
  • I have all these miscellaneous business expenses and reports, but which ones should I keep for reimbursements and deductions?

Sometimes it’s easy to do a quick Google search for these common tax questions. Other times, the answer depends on your business situation, among other variables.

If you have an accountant, keep in touch with them throughout the year. There’s no reason you should wait until tax season every year to speak to them. CPA’s are experts in their field and they’re a great resource that can put you up to date with all the latest changes in tax policy. Stay organized, plan ahead, and you can get the most out of your tax season.