Ready or not, here it comes. Tax season is underway with about one month left to file individual income tax returns.
The deadline for filing a 2022 federal individual income tax return and an Arkansas individual tax return is April 18, 2023, rather than the usual April 15th deadline, due to the District of Columbia’s Emancipation Day holiday. If you find yourself unprepared, here are some answers to the top tax questions to get you started.
What documents do I need to prepare my return?
The following are common documents taxpayers may need to prepare their 2022 tax return.
Employment:
- You will need your W-2s from every place you were employed during 2022.
- If you received any unemployment compensation during the year, you will need Form 1099-G from the state paying the unemployment.
Retirement Income:
- If you were retired or if you took a distribution from a retirement plan, you will need Form 1099-R from each plan that your received a distribution in order to file your return.
- Furthermore, if you received Social Security, you will also need a SSA-1099.
Investment Income:
- If you had interest income (Form 1099-INT), dividend income, (Form 1099-DIV) and/or stock sales (Form 1099-B), you will need these related forms.
- Companies will only send a 1099-INT if you had more than $10 in interest income for the year.
Self-employment Records:
- If you were self-employed, then you will need to have documentation of both your income and expenses.
- In certain circumstances, you may receive a Form 1099-NEC and/or 1099-K for earnings as an independent. In addition to your income, you will need records of any business expenses.
- This includes the business miles you have driven.
Pass-through Income:
- If you had an interest in a partnership, LLC, S Corporation, trust, or estate, then you will need the Schedule K-1 from the entity.
Rental Income and Royalties:
- If you owned rental property, then you will need a record of the rents you received as well as the expenses you incurred on the rental properties.
- Furthermore, if you received royalty income, then you will need Form 1099-MISC from the company paying the royalties.
Other Income:
- If you had any other source of income, you need documentation of it.
- This includes gambling income and cancelation of indebtedness.
Child Care:
- If you incurred childcare expenses on behalf of a dependent, you will need the total amount of these expenses as well as the tax identification number of the child care provider.
Education:
- If you were a student in higher education, you will need a Form 1098-T showing the amount of your higher education expenses.
- Additionally, if you paid student loan interest, you will need Form 1098-E.
Health Insurance:
- If any point during 2022 you had health insurance through the Health Insurance Marketplace, you will need a Form 1095-A before you can filed your tax return.
Should I take the standard deduction or itemize?
According to the IRS, approximately 87% of taxpayers elect to take the standard deduction. For a single taxpayer in 2022, the standard deduction is $12,950 and for a couple that elects married filing joint status then their standard deduction is $25,900. These amounts increase slightly for taxpayers over age 65 or those that are blind. If the total of your state and local income or sales taxes, personal property taxes, real property taxes, mortgage interest payments, charitable contributions, and a portion of your unreimbursed medical expenses exceeds the standard deduction, then you may want to itemize.
One important thing to keep in mind is that even if you choose to take the standard deduction on your federal return, you may want to itemize on your Arkansas tax return. This is because the Arkansas standard deduction is significantly lower than the federal standard deduction.
What if I am unable to file by the April 18th deadline?
If you need additional time to file, you may request an extension.
- To request an automatic 6-month extension of time to file for your federal individual income tax return, Form 4868 should be filed before the filing deadline.
- The deadline for filing returns with an extension is October 16, 2023.
- An extension of time for filing a federal tax return is valid for extending your Arkansas individual tax return also.
- In the event that a taxpayer only need to extend an Arkansas individual tax return, form AR1055 may be filed.
It is important to keep in mind that while you may extend the time for filing a federal income tax return, the extension does not extend the time to pay any tax due. The tax due must be paid on or before April 18, 2023, in order to avoid interest and penalties.
Where can I get help with my Tax Return?
For individuals who generally make less than $60,000, the IRS’s Volunteer Income Tax Assistance (VITA) program offers free tax return preparation and e-filing for basic tax returns. All VITA tax preparation volunteers are required to take and pass tax law training exam established by the IRS. In Central Arkansas, there are several VITA sites, including 2 sites in Conway. One is sponsored by United Way of Central Arkansas and the other is sponsored by Arkansas Asset Builders. Taxpayers can find contact information for the VITA sites using the following link: https://irs.treasury.gov/freetaxprep/
In addition to the VITA program, the IRS Free File Program provides free online tax preparation and filing at an IRS partner site for taxpayer whose adjusted gross income is $73,000 or less. The link for the free filing software is: https://apps.irs.gov/app/freeFile
Why is my refund less than last year?
For the 2021 tax year, certain tax credits were increased or had expanded eligibility due to the global pandemic. Many of those credit have returned to pre-pandemic levels for the 2022 tax year. Taxpayers taking advantage of these credits may see a decrease in their tax refunds for the 2022 tax year as compared to last year due to these changes. These includes changes in the child tax credit, child and dependent care credit, the earned income tax credit, and charitable contributions.
Child Tax Credit: For the tax year 2022, the child tax credit has a maximum amount of $2,000 per dependent under age 17. This is down from a maximum credit of $3,600 per dependent in 2021, depending on the dependents age. Additionally, while the entire of the credit was refundable in 2021, only up to $1,500 of the child tax credit is refundable per dependent in 2022.
Child and Dependent Care Credit: The child and dependent care credit has a maximum credit of $2,100 for 2022. The maximum credit in 2021 was $8,000. While the child and dependent care credit was refundable for eligible taxpayer in 2021, it is no longer refundable.
Earned Income Tax Credit (EITC): The amount of the EITC for a qualifying taxpayer with no dependents is $560 in 2022 compared with the $1,502 in 2021 for the same individuals.
Charitable Contributions: During 2021, taxpayers could deduct up to $300 ($600 for married couples) of cash contributions to charitable organizations even though they claimed the standard deduction. For 2022, taxpayers may only deduct charitable contribution if they elect to itemize their deductions.
Where is my refund?
According to the IRS, over 90% of refunds are issued in less than 21 days for those taxpayers that e-file their return and have the refund direct deposited into their account. In many cases, the refunds are appearing in approximately 10 business days. Taxpayers filing a paper tax return can expect longer wait times on refunds as processing the paper return may take more than 4 weeks. Taxpayer’s may check the status of their refund using the IRS2Go app on a mobile phone or visiting the following site: https://www.irs.gov/refunds.
About the author: Ashley Phillips, JD, LL.M
Ashley Phillips joined the University of Central Arkansas in August of 2016 as a full-time Assistant Professor in the College of Business Accounting Department. Prior to that, Phillips served as an attorney in Tennessee and Arkansas, including as a Senior Attorney for the Internal Revenue Service. At UCA she teaches classes like Accounting 2310 for beginners all the way through Advanced Income Tax courses for graduate students.
Phillips earned her Bachelor’s degree in Accounting from the University of Arkansas, her Master of Laws (LL.M) in Taxation from the University of Florida, and her Juris Doctorate (JD) from the University of Arkansas. Phillips is well known for serving her community though the Volunteer Income Tax Assistance Program. In 2022, she was awarded the Peter J. Mehl Service-Learning Faculty of the Year Award for 2021-2022 and the College of Business Excellence in Service award in 2021.