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 essential 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 find 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 owe money.
Over the years, more and more people are filing their taxes 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 essential 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
Steber said 2022 might also be a complicated tax year because many pandemic tax breaks have ended. He suggests doing a six-month check-up with a tax office to ensure you’re on track not to 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."
This article was written by Stassy Olmos for WFTS.