Soaring inflation. The war in Ukraine. Yet another rise in COVID-19 cases. With so much going on this year it’s hard to focus on things like filing your taxes.
Nevertheless, the IRS still expects you to file your 2021 return and pay whatever you still owe by the filing deadline, which is April 18 for most taxpayers.
If you haven’t filed yet, here are answers to some key questions that will help you through the process:
Do I have to file by April 18th?
Ideally, yes. But if that proves difficult — or you’re just not in the mood — file for an automatic six-month extension by using Form 4868.
Of course, there are some taxpayers whose filing deadline is later than April 18. They include residents of Maine and Massachusetts, whose official filing date is April 19. And the deadline is a month or more later for people living in federally declared disaster areas, as well as U.S. taxpayers living outside of the United States on April 18.
If I do owe money, when is that due?
For most people, you have to pay any remaining 2021 income taxes that you still owe by the April 18 filing deadline, even if you get an automatic six-month extension to file.
What if I don’t pay on time?
You will have to pay even more than you owe, because you’ll be slapped with penalties and interest.
If you really can’t afford to pay on time, and you have a good reason for why, you can make your case to the IRS by attaching a statement to your return when you file. If the IRS accepts your explanation, it may waive the late payment penalty. At a minimum, you need to show that your failure to pay is not the result of “willful neglect.”
To show that, try to pay what you can when you file, even if it’s not the total balance. If that’s not possible and you’re really behind, you may be able to set up a repayment plan with the IRS.
The Internal Revenue Service tax filing deadline in 2022 is scheduled for April 18. Here's what you need to know about filing your 2021 taxes.
What if the IRS owes me money?
If you file an accurate return electronically, and are owed a refund, the IRS will likely have that money sent to you or direct deposited into your bank account within 21 days of receiving your return.
You can check the status of where things stand by using the IRS online tool Where’s My Refund?
I was working remotely for much of 2021. Will that affect my taxes?
It depends. If you worked from a state other than the one where your employer is based, you could be subject to the income tax rules of two or more states.
At the very least you’ll likely have to file more than one state tax return for 2021, which will cost you more if you’re paying someone else to prepare your taxes.
And in some instances — primarily involving five states that have so-called convenience rules — you may even be double-taxed on the same income. (Learn more here.)
The advanced child tax credit is so confusing. How should I handle that on my tax return?
Good news: You are not imagining things. The child tax credit is causing headaches for both filers and tax pros alike.
There were a lot of temporary changes made to the child tax credit just for 2021. For starters, it was raised to $3,600 per child ages 5 and under, and to $3,000 per child ages 6 through 17.
It was also temporarily made fully refundable for 2021, meaning you can get the maximum amount of the credit even if it exceeds your federal income tax liability.
But here’s where the real confusion comes in: The IRS likely has already sent you half the credit you’re entitled to (six months’ worth) through monthly checks sent out between July and December.
You should have gotten a letter from the IRS in the past couple of months detailing what you’ve been paid already. That’s an amount you will need to report on your return. And then you will have to claim the other half of the credit you’re owed, which you will get by way of a refund. (Learn more here.)
I got an IRS letter saying it sent me a stimulus check. Is that reportable and taxable?
The IRS recently mailed Letter 6475 to taxpayers who received a third round stimulus payment, which the agency started sending out in March 2021.
While the payment isn’t taxable, you should report the number from that letter on your 2021 return. The last thing you want is for there to be a discrepancy between the IRS records and what’s on your return. That will cause delays in processing your return and issuing your refund.
And you’ll want to use that number to work out whether the IRS actually owes you more by way of a recovery rebate credit, once you calculate how much more of the stimulus payment you’re due on the basis of your actual 2021 income.
I have cryptocurrencies. Do I have to report that?
Just buying and holding cryptocurrencies are not taxable events.
But if you sold cryptocurrencies, used them to buy something or were paid in crypto, those are taxable events and must be reported.
Virtual currencies are taxed as property, or as an investment, when you sell them. To make matters more confusing, using them to buy something technically counts as selling. So you will be subject to capital gains tax when you sell them.
If you’re paid in bitcoin or other crypto, on the other hand, that will be treated as taxable income to you. So will income earned from mining or staking.
And starting next year your crypto activities will be subject to third-party reporting — meaning both you and the IRS will get the same tax forms reporting your sales and income.
I can’t get through to the IRS and have a question. What should I do?
It’s been very difficult for taxpayers and tax pros alike to reach the IRS by phone because the agency is too understaffed to handle the volume of calls.
If you’ve already invested time combing through the information resources on IRS.gov to find an answer to your question, you might consider an in-person visit to a Taxpayer Assistance Center near you.
Normally you need to make a weekday appointment. But the IRS announced that many of its Taxpayer Assistance Centers will be open to walk-ins on the second Saturday of each month through May. You can find your local office here. Call first to make sure they’ll be open on the day you want to go.
Mintr // Shutterstock
Half of American adults started 2022 with a desire to boost their savings. That admirable intention could prove easier for those who developed good savings habits at a young age.
After all, it’s possible kids who get used to regularly depositing some allowance funds in their piggy bank won’t think twice about setting money aside when higher wages and expenses enter the picture later in life. There’s even a significant bonus for young savers: Compound interest, which is the interest earned on interest.
To demonstrate how people can benefit from this mathematical superpower, GoHenry calculated how starting to save as a kid can impact your wealth by calculating how much money one can make if they started saving $1 a day at the age of 5.
This calculation was made by taking the premise that someone would deposit $365 at the end of a year into an investment account, and this money would compound annually at a market rate of 8%. The story shows the example of how much one would save if they started saving and depositing money at the age of 5, and how much that money increases by the ages of 6, 7, 10, 12, 16, 18, 25, 50, and 100.
Notably, minors can’t open their own savings accounts, but their parents or other adults can open joint or custodial accounts for them.
People Image Studio // Shutterstock
- End-of-year amount deposited: $365.00
- Amount returned: $0.00
- Total end-of-year wealth: $365.00
Abstract concepts like money and the power of compounding are hard for kids to comprehend at this age. Nevertheless, children are typically ready to develop skills that the Consumer Financial Protection Bureau says can build “a foundation for behaviors that support financial well-being,” including saving for the future. These skills include persisting through hard tasks and learning to wait for things they want.
The abilities to control impulses and plan ahead are also important, the bureau notes. Playing “pretend” and games like Simon Says and Red Light, Green Light can help kids build these and other critical skills while having fun.
In addition, encouraging kids to put coins into a glass jar can make the idea of money—and growing it—more concrete and exciting as savers develop their counting skills.
YAKOBCHUK VIACHESLAV // Shutterstock
- End-of-year amount deposited: $730.00
- Amount returned: $29.20
- Total end-of-year wealth: $759.20
This is a great age to introduce allowances, which can be powerful tools to teach young kids about earning, saving, and spending. A 2019 study found kids in the U.S. were receiving an average of $30 a week in allowance, but an important lesson wasn’t sticking: Parents said their children were primarily spending the money to buy things. To help kids better understand savings, parents can encourage them to pick small savings goals and track their progress on a chart filled with colorful visuals.
Parents could go a step further by “matching” their childrens’ savings, like adding 10 cents to the piggy bank for every dollar they save. It’s a benefit children will hopefully recognize and appreciate one day if a future employer offers a similar incentive in the form of a 401(k) retirement savings match.
Darrin Henry // Shutterstock
- End-of-year amount deposited: $2,190.00
- Amount returned: $487.61
- Total end-of-year wealth: $2,677.61
Kids in the fourth and fifth grades are ready to tackle key personal financial topics. These include understanding interest, why it’s important to save for emergencies, and how to develop ways to set short-term and long-term goals for saving, according to the FDIC.
These young smarties can also better understand the benefits of saving money in a bank versus at home. If parents haven’t already opened an interest-bearing savings account (or investment account) for a child, it’s a great time to do so. The best options offer a good interest rate that doesn’t require monthly fees or minimum balance requirements and have online tools that let tech-savvy savers monitor their growing balances.
MAYA LAB // Shutterstock
- End-of-year amount deposited: $2,920.00
- Amount returned: $962.37
- Total end-of-year wealth: $3,882.37
Tweens are typically able to understand the math behind concepts like compound interest, not just the theory. They’re also able to plan ahead and save for things they want. That’s a timely skill as many are old enough to start babysitting, mowing yards, or finding other ways to earn larger sums of cash.
While they may be learning about personal finance at school, many youths are also looking for guidance at home. Half of surveyed kids between ages 8 and 14 said they want their parents to talk to them about how to save money.
VALUA VITALY // Shutterstock
GaudiLab // Shutterstock
- End-of-year amount deposited: $5,110.00
- Amount returned: $3,728.45
- Total end-of-year wealth: $8,838.45
Cash is always a popular graduation gift, and it’s surely welcomed by high-school seniors who are embarking on the transition into a full-time job or the next level of schooling. Some kids who have custodial savings accounts created as UGMA (Uniform Gifts to Minors Act) or UTMA (Uniform Transfers to Minors Act) accounts will finally gain control of them when they turn 18. Others will need to wait until they are 21 or even older.
This is a time for parents to help increasingly independent kids understand not only how to budget successfully, but also how to save and invest for short- and long-term goals. If teens are taking out college loans, they need to gain an honest understanding of the impact that graduating with student debt will have on their personal finances. The average public university student borrows $30,030 in pursuit of a bachelor’s degree, and that sum will likely take quite a while to pay down.
SFIO CRACHO // Shutterstock
Bystrov // Shutterstock
- End-of-year amount deposited: $35,040.00
- Amount returned: $7,337,459.00
- Total end-of-year wealth: $7,372,499.00
There were 97,000 centenarians in the U.S. in February 2021, and that number could increase over time. Life expectancy, or the number of years a person is expected to live, has generally been on the rise in the country since 1980.
Though reaching a three-digit birthday is a remarkable achievement, it can also be scary from a financial perspective. Forty-nine percent of Americans fear they will outlive their savings. It’s a reasonable worry given that Social Security replaces only about 40% of a worker’s pre-retirement income on average.
Fortunately, dutifully saving $1 a day for more than nine decades—and having the money compound annually at a market rate of 8%—could make someone a multi-millionaire by the time they gather around their cake with 100 candles to blow out, plus one to grow on.
This story originally appeared on GoHenry and was produced and distributed in partnership with Stacker Studio.