7 Tax Questions You Need Answered

Key Takeaways:

• The IRS will work with you if you receive a due balance notice.
• Tax code changes may reduce your tax owed in 2022.
• Child Tax Credit received in 2021 could cause problems when you file your next tax return.
• Changes to tax brackets and retirement plans could save you money.

I Received an IRS Notice for a Balance Due Because of an Error I Made – What Can I Do?

If you receive an IRS statement that you feel is wrong (if you did not make an error), you must contact the IRS. Call the number on the letter and keep trying until you get through. If you agree with the letter and know you owe additional tax, the best thing to do is pay it. Make your payment online, if possible, at irs.gov. If you cannot pay it all at once, you can enter into an installment agreement; often, you can do that online at irs.gov as well.

What Tax Code Changes Could Help Reduce What I Owe the IRS in 2022?

The first tax code change that could help what you owe in 2022 is that the standard deduction has been increased again. For those married filing jointly, it has been raised $800; for single filers, $400. The tax brackets have also increased, meaning any bracket starts at a higher amount and ends at a higher amount. These increases mean many people will be able to stay in a lower tax bracket. Finally, the maximum earned income tax credit has also increased.

Could Recipients of the Child Tax Credit in 2021 Face Errors With What They Truly Owe the IRS in 2022?

Yes, people who received a child tax credit in 2021 could undoubtedly see inconsistencies with what they owe in 2022. Many taxpayers will experience this problem. The advance payments made in 2021 were just estimates based on the previous year. Therefore, when the 2021 tax return is prepared in early 2022, the tax credit amount may change—meaning you may owe more money to the IRS. Many people will not be ready for this.

I Received a CP256V Notice From the IRS—What Is This?

A CP256V notice is a reminder sent from the IRS. The CARES Act, instituted due to the coronavirus, provided various help for taxpayers. One form of assistance came from employers postponing social security taxes for up to two years. The CP256V notice is simply a reminder that one-half of the amount postponed is due by December 31, 2021, the other half is due by December 31, 2022. There is nothing to be done because of this notice.

Will the Stimulus Checks Received in 2021 Impact What I Owe the IRS in 2022?

No impact will be felt when you file your taxes because of received stimulus checks. These payments are not income. Stimulus checks are simply free payments by the government, so they will not affect your income taxes. At this time, in late 2021, it is thought there will be a place on the 1040 form to record your stimulus check, but it would just be for informational purposes. You should write down when you received your check and the amount for reference if that policy remains in place.

Will There Be Changes to the Income Thresholds for Federal Tax Brackets in 2022 Considering Inflation?

Yes, the federal tax brackets start at a higher amount and extend to a higher amount. For instance, a very common tax bracket is the 22% bracket. For married filing joint filers, the beginning of that bracket is up by $2,500, and the high-end of the bracket has increased by $6,500. These increases mean many taxpayers will stay in a lower bracket than they may have otherwise.

What IRS Changes Were Made to Retirement Plans That Could Impact My Taxes for 2022?

The most critical retirement-related tax change is if you have a 401(k), you can pay in an additional $1,000 more than last year to count as a deduction. If you have an IRA, the amount you can count as a deduction is phased out if you also have a company-sponsored retirement account. In this case, the phase-out is higher, so you will be able to deduct more of your IRA.

For more information on IRS Laws in South Carolina, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (864) 271-7940 today.