TAMPA, Fla. — Taxes were due about two months ago which means by now, the IRS will either be giving you some money back or asking you to pay and tax experts say it’s extremely important to watch the mail for any notices this year.
In 2021, the American rescue plan brought some financial relief for many struggling during the pandemic.
It gave tax breaks to people paying student loans, reduced taxable income and wages for low-income earners, increased the child tax credit and paid it out earlier, and some even got a third stimulus check.
But all these changes made filing taxes a lot more complicated, so people may be finding out that they owe more money.
“They will find you, they will find your assets they will find your account your savings accounts, your checking accounts, even your income, they will levy and lien that and they will get their money. They're very good at it,” said Mark Steber, the Chief Tax Information Officer at Jackson Hewitt Tax Service.
“There's been a lot of publicity recently in the last couple of years since the pandemic how the IRS is kind of throttling back on audits and on IRS notices,” Steber said.
He explained that that is still true, but not for the CP14 Notices of balance due for unpaid taxes.
“They're not an audit, notice they're not an assessment,” he said. “They're simply the fact that you had income you owe tax and on our system, you don't show that all your taxes were paid in, so by law in 60 days, they have to let you know that you're not completely paid up.”
Millions of these notices are going out right now. Once received, the clock is ticking, with about three weeks to respond.
But Steber does not advise immediately putting a check in the mail to the IRS. It could be something as small as leaving information out such as a side job W-2, and you may not actually owe money.
Over the years, more and more people are filing their taxes themselves online, which can easily lead to errors.
A chart from E-fileshows the increase in electronic filings over the years from about 80% in 2012 to 95% in 2021.
Steber added that there are also some penalties that you can ask for forgiveness on, so it’s important to contact the IRS office immediately and not put it off.
“It adds up very quickly. I've seen many many cases over my career where the penalties and interest and cost to fix it is much more than the interest or the taxes would have been if you just paid it upfront and you do owe it.”
While interest is currently 4% per year, accruing daily, the penalties can be painful — including:
- 25% failure to pay
- 25% underpayment
- 25% failure to file
“You should not ignore it and you should understand it and you should have someone who's trained and experienced explain it to you if you're not comfortable yourself,” Steber advised.
In addition, while Florida may not have an income tax, a lot of people moving to the Sunshine State during the pandemic still have assets or income in other states which can complicate taxes even more.
If you cannot pay the full amount owed, you can apply online for a payment plan (including installment agreements).
In cases of financial hardship, you can also apply to the Temporary Delay of Collection Process.
Steber said 2022 may also be a complicated tax year because a lot of pandemic tax breaks have ended. He suggests doing a six-month check-up with a tax office to make sure you’re on track to not owe more money at the end of the season.
The IRS also has a Tax Withholding Estimator that estimates your federal income tax paycheck withholding amount and can help you perform a "paycheck checkup."