Tax season is officially here!
The IRS opened for business tax returns to begin efiling again on January 7th. They announced yesterday they will open for all returns, including individuals, to eFile tax returns on January 24th.
What does this mean?
We won’t be waiting for the IRS to open to file your tax return! But, that doesn’t mean your 2021 income tax return will be filed on the 24th. Even if we have all information, the IRS is not allowed to begin processing most returns for refunds until after February 15th. In many instances, this is the earliest you will have all of your information.
So how do we get those returns prepared!? There’s a few steps we need to get through. I’ll highlight one of them below. Additional steps and answers to questions can be found on our FAQs.
Auxiliary Software Consents
These are starting to roll in. I will need a completed Auxiliary Software Consent from you and your spouse if you’re filing a married filing jointly return. If you haven’t done so already, click the link above and complete that consent! If you (and your spouse if married filing joint) have completed your consent, please sit tight. Your engagement letter is on the way!
Engagement Letters & Organizers
Organizers are completed and ready for you to fill out. Engagement letters are rolling out to you once I’ve received your Auxiliary Software Consent from above. More information can be found at our FAQs.
Gathering Tax Documents
You can begin gathering your tax documents prior to receiving your engagement letter. Save all of your information in one place as it comes in. I use and recommend the app TurboScan (available for both Android and iOS devices) as a scanner to scan anything that needs saving. If you’re receiving digital documentation, please make sure you have the password available for any secured documents and that you provide that password when you upload your documents to your portal.
Most tax documents won’t get to you much before the end of January, and some not even until the middle of February.
Individuals should be keeping an eye out for two letters from the IRS:
Advance Child Tax Credit payments will be reported on Letter 6419. You have likely already received this letter. More information on this particular letter will be available in your Organizer.
Economic Impact (Stimulus) payments will be reported on Letter 6475.
Identity Protection Personal Identification Number (IP PIN) letters should be rolling out if you haven’t received it already. If you have enrolled int his program, you will receive a new IP PIN annually. This number will be necessary to file any return during 2022. We will not be able to eFile your tax return without this number. Please don’t loose this letter.
Tax Law Changes
While many of you hail from all over the United States (and a few from around the world), Crayon Advisory is based in Portland, Oregon. Many of our clients are as well. The area has two new taxes that are in effect for 2021:
Portland Metro Supportive Housing Services is a 1% tax on Oregon taxable income over $125,000 individuals or $200,000 for couples filing married filing jointly. Income is taxable to residents of Portland Metro as well as income over the above thresholds earned inside of Portland Metro by non-residents;
Multnomah County’s Preschool for All is a 1.5% tax on Oregon taxable income over $125,000 for individuals or $200,000 for couples filing married joint. There is an additional tax of 1.5% for income over $250,000/$400,000. This is taxable to Multnomah County residents and non-residents with income sourced to the county.
Both of these programs are administered by the City of Portland. If you know your income is at or above the above thresholds and you are a resident of the above locations or a non-resident with income sourced to the above locations, you will be subject to this tax. You will need to register for these taxes. If you are unsure if you are subject, do not register quite yet. The City of Portland is asking people to only register if they are subject to these taxes. We’re here to help you figure out whether or not you are/will be subject.
Lastly, I know the news as been abuzz about the new reporting requirements for 1099s from payment processors (Venmo, Paypal, etc) in the last week or so. Prior to 2022, the reporting threshold has been $20,000 or 200 transactions processed by a third party payment provider when processed for services provided or goods sold. Beginning with tax year 2022 (so 1099s prepared and delivered in 2023), that threshold drops down to $600. This reporting requirement is not new. It’s just a different threshold.
As a result of this change, some people will need to provide information in order to continue to use these platforms, particularly those who sell personal goods through eBay, Facebook Marketplace, or similar. This change may effect you even if you don’t have a business. However, in most instances, the sale of these items will not create a taxable event.
The takeaway right now? Before you react to news articles or a relative or anyone else who’s unhappy about a tax situation, take a deep breath. Then, ask yourself if the words are coming from an emotional or a factual viewpoint. Finally, if you’re concerned, ask your friendly tax professional what’s going on and how this might affect you.