Source: Nichole Huff, extension specialist for family resource management 

 

Now is the time when we start thinking about filing our income taxes from the previous year.  Even though it’s an annual event, it can cause anxiety for many, especially in light of pandemic-related circumstances. By preparing now, you can ease the process for yourself and your tax preparer.  

Begin by gathering the necessary forms including your Social Security number and that of your spouse if filing jointly, plus the number(s) of your dependent(s). In addition to your W-2 or like form, you want to include information about any interest you earned from savings accounts, stocks, mutual funds and virtual currency transactions, as these are also taxable. You will need to gather other 1099 forms from any earned compensation, including unemployment compensation, pension distributions, annuity or retirement plan, or contract employment. 

Depending on your circumstances, additional forms you may need for 2022 include Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance premium tax credits for coverage, Letter 6419 to reconcile your 2021 advance Child Tax Credit payments, and Letter 6475 that details your 2021 Economic Impact Payment to determine whether you are eligible to claim the Recovery Rebate Credit. 

One of the largest deductions many people can claim is mortgage interest. If you have a mortgage, you should have a 1098 form from your lender specifying how much interest you paid in the last year.  

Your goal should be to break even at tax time, which means you don’t receive a big refund from the state or federal government or you don’t have to write a big check to either or both.  

Every year, thousands of taxpayers get refunds. While some consider overpaying in taxes on their paycheck a form of forced savings, you may want to consider how you could use this money throughout the year. The extra money could help you with such things as building your personal savings or emergency fund, making an extra house payment or paying off debt. To change your tax withholding, you will need to file a new W-4 form with your employer.  

If you expect a refund this year, know that different factors may impact when you receive your return. The IRS issues most refunds in under 21 days, however the IRS cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Returns that require additional review can take longer, especially in light of the record number of identity theft and refund fraud brought about by the pandemic. Further, by law refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) can't be issued before mid-February.  

Other reasons for delay include returns that require manual review due to possible error, missing information, or suspected identity theft or fraud.  

To receive your refund quickly, file your taxes electronically as early as possible and have it deposited directly into your checking account.   

If you owe the IRS money this year, you may want to consider changing your withholding status with your employer. This will allow more money to be taken out of your check throughout the year, so you’re not hit with a big payment next year.  

For Kentucky victims of severe storms, straight-line winds, flooding and tornadoes in 2021, you may be eligible for Tax Disaster Relief from the IRS. To learn if you qualify, visit https://www.irs.gov/newsroom/irs-announces-tax-relief-for-kentucky-victims-of-severe-storms-straight-line-winds-flooding-and-tornadoes.  

For general information on filing taxes this year, visit https://www.irs.gov/newsroom/top-5-things-to-remember-when-filing-income-tax-returns-in-2022.  

To get more information on family financial topics, contact the (COUNTY NAME) office of the University of Kentucky Cooperative Extension Service. 

Educational programs of the Cooperative Extension Service serve all people regardless of economic or social status and will not discriminate on the basis of race, color, ethnic origin, national origin, creed, religion, political belief, sex, sexual orientation, gender identity, gender expressions, pregnancy, marital status, genetic information, age, veteran status, or physical or mental disability.  

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FCS