Most people file their taxes using a software program designed to make the process as easy as possible. However, this year, there are some new wrinkles to the system that may make things more complicated. Here are a few things you need to look out for and how to deal with them so that you won’t need to worry about how to get out of tax debt or pay high-interest rates on your penalties.
The changes affecting your taxes this year
There are several changes affecting your taxes this year that are important to be aware of.
- The standard deduction has been increased to $12,000 for individuals and $24,000 for married couples filing jointly. This means that more people will be able to reduce their taxable income by taking the standard deduction.
- For the 2021 tax year, President Biden expanded the Child Tax Credit from $2,000 to $3,600 for children under the age of 6. For children aged 6 – 16, the Credit increased from $2,000 to $3,000. However, this credit will expire and has not been approved by Congress for 2022.
- The estate tax exemption has been increased from $5 million to $11 million.
All of these changes will impact how much money you will need to pay in taxes this year.
How to deal with the new tax changes
The new tax laws that went into effect this year are more complicated than usual. Here are some tips to help you deal with the changes:
- Get organized. Make a list of all the taxes you will be paying this year, and figure out which ones apply to you.
- Review your tax returns from previous years. If there have been any changes, you may need to make adjustments to your current return.
- Talk to a tax professional. Navigating your yearly tax obligations can get complicated quickly, especially if you have dependents, run a business, or have a lot of deductions. Utilizing a tax professional could help ensure your taxes are filed on time and that the information is accurate, saving you from having to deal with an IRS audit.
- Utilize online resources to prepare your tax return. There are many resources to help taxpayers, such as the IRS website, TurboTax, and H&R Block. Taxpayers can also use these resources to find information on specific taxes, prepare their returns, and get support from tax professionals.
Other common tax mistakes to avoid
Making mistakes on your taxes can have serious consequences that result in penalty fees or even jail time. Luckily, they’re easy to avoid if you pay attention. Here are some common tax mistakes to avoid:
- Failing to report all of your income. This can result in a hefty tax bill and penalties and interest charges.
- Not declaring all of your deductions. This can save you money on your taxes, but it may also limit the amount of money you can claim as a deduction.
- Not filing your return on time. If you don’t file by the deadline, you may not be able to get your refund and may have to pay interest on any unpaid taxes.
The bottom line
This year’s tax season is more complicated than usual, but you can still file your taxes on time and avoid any penalties with a bit of planning and preparation.