The world seems to be hanging on a razor’s edge.
There’s a lot of fear going around with Russia’s invasion of Ukraine last week. With a 24-hour news cycle, a heap of different internet sources, social media feeds, and more, it’s difficult to not give in to it all… and to know exactly what’s true.
If there’s anything I could advocate for at this time it’s this: Stay focused on what’s before you. Don’t get caught up in the unending onslaught of news coverage and doomscrolling through updates. Take time to hug your family, go for a walk, jump into your work with new zeal. The key is to keep your mind clear, avoid the fear, and stay steady despite the rocking ship that is the current state of affairs.
Over here at Bell Tax Accountants & Advisors, we’re so busy it’s much easier for us to do that than the normal person, perhaps! We’ve been in appointment after appointment and cranking out 2021 tax returns for all of our great Chicago clients.
Speaking of … if you haven’t scheduled an appointment yet, take a quick minute to get into a time with us. Wait too long and things might be even MORE hectic than they are now:
Today’s Note is just one reason we are strongly recommending you don’t delay getting your 2021 returns filed. With the IRS hurrying to catch up on things from 2021 and all of the tax credit changes, delay is almost a guarantee when it comes to filing your taxes this year.
If you’re like a lot of Chicago people who are eagerly anticipating a 2021 tax refund, there are a few things to be aware of that might mean you get less than previous years.
Let’s dive in…
Factors Affecting Chicago Taxpayers’ 2021 Tax Refund
“Blessed is he who expects nothing, for he shall never be disappointed.” – Alexander Pope
Though it amounts to an interest-free, year-long loan to the government, a lot of people like to pay the maximum amount of tax possible in order to get a big tax refund. But if you’re one of those people, you may be in for sticker shock and/or a longer wait for your 2021 tax refund.
As we all know, a tax refund is doled out if you paid more tax than was owed based on taxable income. In addition, the IRS lets you trim your tax bill with deductions, either a standard one or an itemized deduction… if you qualify. (Want to know more? Reach out to us.)
Of course, every tax situation is different, but there are several reasons your 2021 tax refund may not be what you expect this year (please don’t shoot the messenger).
Let’s walk through what’s going on.
What’s so special about this year?
Last year, the filing season saw a host of problems; tens of millions of taxpayers’ federal returns processing (and consequently their refunds) were delayed by the IRS.
But that was a year ago. Things must be better by now, right?
Well, not exactly. Experts have added that at the start of a typical tax-filing season, the IRS is about a million returns still to get through from the year before. This year the IRS still has a backlog of some 24 million returns from last year still to process.
Yet, so far this tax filing season, the average refund is up a little over this time in 2021 (filing season also got off to a late start last year, which could skew the numbers). Most 2021 tax refunds are about twenty-three hundred bucks. We won’t know the final numbers until well after the federal tax deadline on April 18.
Nevertheless, there are a few things that might reduce your 2021 tax refund – depending on your circumstances:
The Advance Child Tax Credit. Lawmakers changed this credit a lot last year, including adding an “advance” provision that allowed some taxpayers to get half of their estimated 2021 credit in early monthly payments. If you didn’t opt-out of this, you should’ve seen money from the IRS last summer through the end of 2021.
You should have received Letter 6419 from the IRS in your mailbox. This letter details the total amount of advance child tax credit money you received (or should have received last year. We’ll need that letter to do your tax returns, by the way – missing info is a major cause of delayed return processing and refunds (see below).
Trouble is, having received a chunk of your estimated child tax credit last year means that your coming refund could be much less. If you made more in 2021 than you did 2019 or 2020, you may have to pay some of the credit back. Again, don’t shoot the messenger …
Student Loan Interest. This is normally deductible. Two years ago, as part of pandemic relief, the feds paused student loan payments for eligible loans. This break suspended loan payments, instituted a 0% interest rate, and stopped collections on defaulted loans. (Just before last Christmas, this was extended through May 1 of this year.)
If you got to hit pause on such payments, it was probably good to have the cash in your pocket – except you never paid interest on the loans during that time and so now can’t take the deduction.
Unemployment. For years, unemployment benefits if you lost your job were taxable (seems a little unfair, but it’s true). Again, pandemic relief made some of this money tax-free under certain conditions – but only 2020’s unemployment, not 2021’s. You are on the tax hook for that money, potentially shrinking your 2021 tax refund – but make sure you didn’t receive any 2020 benefits late (that is, in 2021, aka late accrued payments). You definitely want to know about these for your 2021 tax return.
Historically, refunds have taken about 21 days after filing, but other snags could include:
- Bad math or wrong/missing information.
- Paper returns are always slower. Go with electronic filing and, if you can, direct deposit on your refund.
- If you filed your return in January and claimed the Child Tax Credit or Earned Income Tax Credit, the earliest by law you could’ve gotten your refund was mid-February.
- “Your return needs further review.” If the IRS tells you this, don’t panic – just let us know. It’s probably nothing, but it could slow your refund.
You can start checking the “Where’s My Refund?” IRS page 24 hours after you e-file your return or four weeks after you mail your paper return.
File when you’re ready, and we’re ready when you file. We are Chicago tax experts, and we’re here for you all through the filing season – and beyond.
In your corner,
Bell Tax Accountants & Advisors