Renner Individual News; July 29, 2022

According to the Internal Revenue Service (IRS), an estimated 19 million taxpayers requested an extension to file their 2021 tax return. However, just because you have more time doesn’t mean you should use all of it.

There are a number of good reasons to file your return as soon as possible.

Ensure More Timely Processing

As soon as you have all the necessary information to file an accurate return, you should do so electronically before the deadline on Oct. 17, 2022. This ensures timely delivery and processing by the IRS.

“Just get it off your list, and you don’t have to think about it,” said Justyna Zuchmanska, CPA, Senior Tax Manager at Renner and Company.  “There’s really no benefit to waiting.”

Minimize Interest and Penalties

The IRS won’t penalize you for not filing a return if you’re due a refund. However, it also has no statute of limitations for assessing and collecting taxes due if no return has been filed.

Start the Statute of Limitations

“If there’s a balance due, you should pay something in,” said John J. Renner, II, CPA and founder of Renner and Company. “(Paying earlier) cuts down the penalty if (you) owe and the statute of limitation starts running the day (you) file the return. … It’s better to get it to us now.”

The IRS will charge interest on any tax not paid by the April due date, which accrues until you pay in full. Individual taxpayers face interest charges at the federal short-term interest rate plus 3 percentage points, currently 5% per year, compounded daily. On top of the interest, penalties accrue for each month that tax remains unpaid until maxed out at 25% of the unpaid tax.

Pin Down Your Tax Liability

Some taxpayers may owe taxes they don’t even know about.

“For 2021, a lot of people ended up having capital gain distributions on their brokerage statements,” Justyna said. “They were higher in 2021 than ever before because it was a very good year for investments. People who had a good year in investments might not even realize they might end up owing taxes for 2021 because of making investment income.”

Get a Rebate

Virginia taxpayers have additional incentive to file sooner rather than later: Rebates.

Taxpayers with 2021 Virginia income tax who file their returns by Nov. 1, 2022, could qualify for a Virginia income tax rebate of up to $250 for a single taxpayer or up to $500 for married taxpayers filing joint tax returns. To learn more about these, check out this article.

Stay Current

Correspondence from the IRS goes to a taxpayer’s last known address, usually from their most recently filed return. If you have moved and not filed a change of address to the IRS, you may not receive a notice and could miss the deadline to respond.

Get Your Refund

Taxpayers expecting a refund should choose direct deposit. The refund goes directly from the IRS into your bank or financial account, getting you the funds in the fastest time possible. The IRS processes most e-filed returns and issues direct deposit refunds in less than 21 days. Contact Renner and Company here for assistance in filing your 2021 return or any other questions.

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