What to know about Tax Season

Understanding tax season might help you submit your taxes on time and even improve your working relationship with tax specialists.

What is Tax Season?

Tax season is the time of year for most people to file their income taxes. 

Individual taxpayers normally prepare financial statements and reports for the previous year and submit their tax returns during tax season, which runs from January 1 to April 15 each year.

Individuals in the United States are required to file their annual tax returns by April 15 of the following year following any reportable profits. Late penalty costs and interest charges apply to tax returns filed beyond the end of the tax season.

This is frequently true for both federal and state income taxes, which are due at the same time. The Internal Revenue Service (IRS) proclaims a tax season when it begins taking federal income tax returns, however, this might vary from year to year.

How Tax Season works

The tax season usually lasts from the beginning of the calendar year through the middle of April, but there are exceptions.

An accountant, for instance, might specialize in assisting self-employed individuals with their tax returns, in which case their tax season revolves around quarterly anticipated tax deadlines.

A tax preparer may have clients who frequently request IRS filing extensions. In this instance, they may have a second tax season in October, which leads up to the standard extension filing date of October 17.

The main tax season normally occurs in the first few months of the calendar year. Annual income taxes are calculated based on the previous year's earnings, which is why tax season begins in January.

If you begin the filing procedure in December 2021, you may not be able to account for all of your earnings for the year. But if you wait until January 2022, you might be able to verify what you made for the entire tax year 2021.

For some, tax season may not begin on January 1 because they will not have enough time to collect the essential paperwork, such as W-2s, which is the wage and tax statement.

However, some tax preparers may be busier at this time, calling out to customers and prospects in preparation for the approaching filing season.

The start of the IRS tax season varies, although it usually happens a few weeks into the year. The start date was pushed to February 12, in the year 2021.

The IRS stated this provided them more time to build and test its systems, due to some changes that were to be made in 2020.

Although some people prepare their tax returns, many others rely on the knowledge of tax preparers and accountants to ensure that the documentation is submitted correctly and that the tax return's financial outcome is enhanced.

The Internal Revenue Service (IRS) Free File program allows individuals who earned $73,000 or less in 2021 to file their taxes for free. Individuals are required to file federal, state, and local tax returns.

For the 2022 tax year. A person with gross income, which is income from all sources, of more than $12,950 is required to pay federal tax, according to the IRS.

On any net earnings from self-employment of $400 or more, independent contractors, or what the IRS describes as “non-employee compensation” must submit a report and pay self-employment taxes.

Employers have until January 31st to file and send W-2s to employees. Businesses that engage independent contractors must send Form 1099-NEC which is the non-employees compensation, beginning in the 2021 tax year.

This form replaced the 1099-MISC, which is still in use for payments such as rent, rewards, and health care, among other things.

Exemptions and Extensions

Even though the due date to file your taxes is almost always April 15, the IRS may need to extend it in some instances. It was the situation for the 2020 federal tax year.

Due to the coronavirus pandemic, the filing deadline for people was extended until May 17, 2021.

Because of the winter storms that slammed Texas, Oklahoma, and Louisiana in February 2021, residents of those states were allowed an additional extension. Individuals and corporations had until June 15, 2021, to file their 2020 tax filings.

Then, in the spring, storms caused enough damage in Tennessee, as well as sections of Alabama and Kentucky, and more extensions were granted.

Why you should file early

Starting your tax filing procedure early allows you to gather the evidence you'll need to claim all of your deductions. You'll save yourself the hassle of late-night concerns about numbers and receipts.

Your accountant's schedule will become more flexible, and he or she will most likely be able to begin operating on your accounts right away.

Key Notes on Tax Season

All taxpayers should maintain copies of their prior-year tax returns for at least three years, according to the IRS. In the event of an IRS audit, a taxpayer must produce their records for the previous three years.

They will be required to present seven years of papers in extreme circumstances, such as suspicion of theft.

Another benefit of understanding tax season is that it may help you receive your tax refund sooner if you're due one.

In general, the earlier you file your tax return around the beginning of tax season, the sooner you'll receive your refund. An e-filed return takes roughly two weeks to issue a refund, but a paper return can take up to six weeks.