It's not a favorite day for many taxpayers: Americans can begin filing their taxes with the IRS starting today through Apr. 18.
It's unclear at this point whether or not the IRS will extend the deadline, but some states have already announced different deadlines for their own state individual income taxes. Maine and Massachusetts residents have until Apr. 19 to file their federal income taxes due to Patriots' Day, a holiday in both states.
But regardless of which state you reside in, there are several things you should know about filing your taxes this year. Select interviewed Eric Bronnenkant, head of tax at Betterment, to find out what Americans should keep in mind as they prepare to file their taxes for 2021.
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What to keep in mind for filing taxes in 2022
1. Security should be a top concern
Identity theft is a major issue, especially around tax time. Not only can someone compromise your identity by stealing your credit card info, they can also file an illicit tax return in your name — with the hopes of grabbing your return before you even realize.
The best way to avoid this situation is to file your tax return as early as possible. However, Bronnenkant suggests also using the Identity Protection Pin program offered by the IRS.
This program will give you a unique pin code to file your tax return with to verify someone isn't using your info. The process takes a few minutes to sign-up, but its free and easy to use.
Bronnenkant told Select that "everyone should use it."
If you want additional protection, using an identity theft monitoring service can help you catch fraud quickly. Select ranked IdentityForce® as the overall best program for its identity theft insurance up to $1 million and certified identity restoration experts who assist consumers with all of the necessary paperwork and phone calls if they discover their identity has been compromised by criminals in an IRS tax fraud scam.
IdentityForce®
Cost
UltraSecure Individual: $19.90 per month or $199.90 per year; UltraSecure+Credit Individual: $34.90 per month or $349.90 per year; UltraSecure Family: $24.90 per month or $249.90 per year; UltraSecure+Credit Family: $39.90 per month or $399.90 per year
Credit bureaus monitored
3-bureau credit monitoring, alerts and reports: Experian, Equifax and TransUnion®, with UltraSecure+Credit Individual and UltraSecure+Credit Family plans only
Credit scoring model used
VantageScore® 3.0, with UltraSecure+Credit Individual and UltraSecure+Credit Family plans only
Dark web scan
Yes, with all plans
Identity theft insurance
Yes, at least $1 million with all plans
Terms apply.
Pros
- 3-bureau credit monitoring, alerts and reports
- Free VantageScore® 3.0
- Dark web scanning
- Minimum $1 million identity theft insurance coverage
- Offers family plan
Cons
- Plans start at about $20 per month
- Doesn't look at FICO® Score
- Credit monitoring, alerts and reports perks require UltraSecure+Credit plan
2. Make sure your numbers match up
Organization is a very important part of filing your taxes, as one small error could lead to an audit.
Specifically, credits like the Child Tax Credit will likely lead to many Americans potentially claiming more than they should.
Bronnenkant gave the example where someone may have been receiving Child Tax Credit payments throughout the year (or an entire lump sum). He warns that Americans shouldn't be claiming this credit twice. For example, if a tax payer has already received their full $3,000 credit, they shouldn't be claiming anything on their return. Or, if they've received only $1,000, that they should only claim the remainder of the funds due to them.
If you happen to overclaim how much you are owed, Bronnenkant warned you could owe that money back to the IRS.
3. Using tax software may be your best bet
With so many changes to the tax code each year, it can be worth it to use a tax software service like H&R Block or TurboTax.
These software services can save you time and money when filing out your tax return, plus help you avoid making a mistake that could cause headaches, and potentially even fines, from the IRS.
Also keep in mind there are free alternatives to file your taxes such as TurboTax's free edition*. If you made $73,000 or less in 2021, you can file your taxes for free using the IRS's Free File program. Additionally, there are plenty of resources and discounted tax filing services for college students. *(according to TurboTax, about 37% of taxpayers qualify for this edition and it's available for Form 1040 + limited credits only)
H&R Block
Online plans
Free, Deluxe, Premium, Self-Employed
Free version
For federal and state returns (Form 1040 and limited credits only)
Guarantee
Maximum refund and 100% accuracy guarantees
Live support
H&R Block's AI Tax Assist and unlimited live chat are free with all paid plans and a review by a tax pro is available for a fee.
Tax refund advance loan
Not with H&R Block Online
Terms apply
Read our review of H&R Block online
Pros
- Simple step-by-step guidance
- Free plan takes federal and state returns
- 100% accuracy and maximum refund guarantees
- Thousands of branches for in-person help
Cons
- More expensive than competitors
- Must have a paid plan to speak with a live tax expert
- Refund advance loans not available for online customers.
TurboTax
Online plans
Do It Yourself, Expert Assist, Expert Full Service, Expert Assist Business, Expert Full Service Business
Free version
Federal and state returns (Form 1040 + limited credits). According to TurboTax, 37% of taxpayers are eligible.
Guarantee
Maximum refund and 100% accuracy guarantees
Live support
Expert Assist plan includes unlimited assistance and final review, while Expert Full Service adds a dedicated expert to complete and file your return.
Tax refund advance loan
Up to $4,000
Read our review of TurboTax tax software.
Pros
- Step-by-step guidance with easy-to-follow Q&A format
- On-demand advice and a final review from a tax expert
- Expert Full Service plan has a tax expert who can complete your return
- Offers tax refund advance loan
Cons
- More expensive than other tax-prep software programs
- May try to upsell you into getting pricier plan
In the Build Back Better plan proposed by the Biden administration there are proposals to eliminate several retirement account strategies to avoid paying more taxes.
The plan wants to end the backdoor Roth IRA, which allows high-income individuals who don't qualify for a Roth IRA to put money into a traditional IRA first and then convert it into a Roth IRA. Currently, there is no limit on how much someone can rollover — avoiding taxation as long as you keep the funds in the Roth IRA until 59 and a half.
Additionally, the plan proposes to end 'mega backdoor Roths', which allows high-income earners to avoid taxes by converting a 401k into a Roth IRA with no taxation.
While the proposal is still on Capitol Hill, you may want to consider applying one of these strategies before they end. However, make sure to consult a tax professional first to see if this is best for you.
Bottom line
The IRS is anticipating more than 160 million individual tax returns this year, with a mass majority being filed online, so it's important to get yours in earlier rather than later. It's also recommended by the IRS to file electronically to avoid any delays. If you file electronically without any issues and opt for direct deposit, the IRS expects to issue refunds within 21 days of filing. And after you file, you can check your refund status here.
Additionally, if you have tax-related questions, Bronnenkant recommends reading up on the IRS website — as it's incredibly difficult to talk to an IRS agent on the phone.
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