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Claiming COVID costs and 4 more questions about filing your taxes this year

By on January 29, 2022 0

It’s time to file your tax returns, and the 2022 filing season promises to be different from years past.”

“The big thing is that there are a ton of tax changes related to stimulus funds and other benefits that people may have received in 2021” because of the pandemic, said Lynnette Khalfani-Cox, l financial expert also known as Money Coach.

Some of these changes will result in smaller refunds. But while the IRS warns it has a large backlog of returns to process, people can still avoid long delays if they file electronically, Khalfani-Cox says.

Can I deduct costs related to COVID-19?

The pandemic has been a costly crisis for many families – and some of the more common costs can affect your taxes.

“You can deduct COVID-19-related expenses — like face masks and personal protective equipment (PPE),” Khalfani-Cox said, “but only to the extent those costs and your medical expenses exceed $7.5 % of your adjusted gross income.

For example, a household with an adjusted gross income of $67,521 (the median income in 2020) would have to spend more than $5,064 before this tax break takes effect. Another caveat: you cannot claim COVID-19 related expenses if your insurance company reimbursed you for them.

If your situation does not meet these guidelines, you have another option. The IRS says a host of costs, from hand sanitizer to in-home COVID-19 testing, can be paid for or reimbursed through tax-free spending accounts such as flexible spending accounts and health savings accounts.

How will the changes to the child tax credit change things?

Financial advisers are warning taxpayers to expect lower refunds than last year.

“Part of the reason is that people have to account for that child tax credit they’ve already received in advance,” Khalfani-Cox said.

The child tax credit was extended as part of the US bailout, benefiting tens of millions of US households.

The program sent monthly checks to eligible families in the second half of 2021, with up to $300 per month for each child under 6 and $250 per month for older children. For tax purposes, this money is not considered income, but since they are prepayments on a tax benefit, they reduce the amount the beneficiaries would otherwise have received in their refund.

Like NPR’s Cory Turner reportedcurrent estimates suggest “that at the end of tax season, families will have received an average of $4,380 of the 2021 version of the Child Tax Credit, compared to the $2,310 they got with the previous version.

The US bailout also increased unemployment benefits – but the tax rules for that money are different from the year before.

“People laid off were able to foreclose up to $10,200 in unemployment benefits in 2020,” Khalfani-Cox said. “This exclusion disappeared last year.”

With this time frame, the full amount of unemployment benefits in 2021 is federally taxable again.

Could my refund be delayed this year?

Taxpayers who file early and electronically should be able to avoid massive delays, Khalfani-Cox said.

“However, the delays will likely be felt primarily by people submitting tax returns manually or on paper,” she said.

Erin M. Collins, the IRS’ National Taxpayer Advocate, says the agency has a backlog of some 35 million returns. The IRS is overworked and underfunded, and it faces these challenges while using outdated computer systems.

“By far the fastest way to get your refund check is to electronically deposit and have the funds deposited directly into your bank account,” Khalfani-Cox said. “Most people are already doing this, but some people are actually filing paper returns.”

The timing also depends on the content of your statement. The IRS said only by law, it cannot issue refunds to anyone claiming the working income tax credit until mid-February. This benefit applies to low and middle income householdsearning less than $57,414.

If all goes well, the IRS saidtaxpayers claiming either the EITC or the Supplemental Child Tax Credit should expect to receive their refund by the first week of March.

Another benefit of online filing, Khalfani-Cox said, is that the IRS Mobile App and Website offer status updates on your return – including a “Where’s my refund?” tab — within 24 hours of filing.

If you end up needing help from the tax agency, be prepared to wait: IRS callers have faced an average 23 minute hold time, according to the National Taxpayers Advocate, and only about a tenth of callers were able to reach a representative. The dismal numbers reflect a record 282 million phone calls – nearly triple the previous year’s total – due to widespread questions about the change in tax rules.

“This is going to be, unfortunately, a frustrating fiscal season,” Deputy Treasury Secretary Wally Adeyemo said. said NPR this week. He urges people to file their return online and to be very careful about preparing their returns to avoid any hiccups.

So when is the tax deadline?

The IRS officially started accepting 2021 tax returns on January 24, but don’t worry if you haven’t yet: many of us haven’t received all the documents we need yet. .

The general deadline for filing your tax returns is Monday, April 18. The date is later than the normal date of April 15 because the District of Columbia Emancipation Day falls on the weekend, meaning it will be observed this Friday.

Residents of Maine and Massachusetts have an extra day to file because the 18th is the Patriots’ Day holiday in those states, pushing the tax deadline to April 19.

How can I avoid common mistakes?

“A huge common mistake people make is waiting until the last minute to file,” Khalfani-Cox said, “and not having enough time to gather the paperwork needed to claim all of the deductions and credits for the claim.” procrastination can cost people money, especially since the IRS says the average tax refund check is around $3,000.

Another big mistake people make, she says, is blowing their refund check rather than hiding at least some of the money in an emergency savings account.

“Instead of just spending that windfall or letting the money slip through your fingers, make sure you save some of it. With inflation, the ongoing pandemic and so many people quitting their jobs, it’s more important than ever to have a good chunk of emergency savings.

Khalfani-Cox recommends using online tools to track your savings and other bank accounts — and to add to your reserves when that tax refund arrives.