The Key Things Every American Should Know About Paying Their Taxes

By Myles Leva

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Last Updated: March 2, 2022

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When it comes to American taxes, many people try to avoid, or put off the situation. This is mostly due to inexperience, or not fully understanding everything that is involved in the process. 

But avoidance will not change the fact that you have to do them. Educating yourself about the experience can help you to feel less intimidated. Here's where we come in! Let's take a look at American Taxes 101 - what you can expect and what you should know. 

 

What Are the Most Important Things To Know About Taxes?

These are the main things you need to know about American taxes this year.

The IRS has published a list of reminders about how to make filing taxes easier and significant changes for the 2021 tax year.

In addition, we decided to start off with the US taxation basics, including tax deadlines you should be aware of.

 

1. American Taxes Deadlines

The tax deadlines for 2021 tax returns are:

January 14: IRS Free File opens.

January 18: 2021 Q4 estimated tax payment.

January 24: 2022 tax season begins. Tax returns will be accepted and processed.

April 18:  2021 tax return due date OR extension request due date.

April 19: 2021 tax return or request extension and pay tax owed due date for MA or ME (Patriots' Day holiday)

 

2. How to Avoid Mistakes and Delays

The fastest way to file your taxes for 2022 is to use e-file and direct deposit. But before you go ahead and file, make sure you have everything you need to ensure accuracy.

The e-file software is meant to help individual taxpayers avoid mistakes. That’s because e-file has all the tax rates and rules built in. This enables it to correct mistakes in a few ways, starting with automatic calculations. After that, e-file also guides users through their taxes in a simple Q&A format.

Using a more traditional method of filing taxes will certainly take more time. You also run a higher risk of making a simple mistake. But even a small mistake can become a headache.

 

3. Advance CTC Letter 6419

This official IRS letter was sent in December 2021 to people who received advance CTC payments. If you received one, it will have “Letter 6419” printed on the bottom right.

If you received this letter, it’s important that you check it. It will include important information you need to account for advance CTC payments in your tax returns. You can also:

  • Check your total CTC payments online with the IRS
  • File a 2021 tax return to receive the second half of the credit (if you received the advance Child Tax Credit)

 

4. Third Economic Impact Payment Letter 6475

This official IRS letter is set to be sent in January 2022 to people who received a third Economic Impact Payment in 2021. The letter is titled “Your Third Economic Impact Payment”.

Most eligible people already received their payments. However, the letter is meant to:

  • Help you determine if you are eligible for the Recovery Rebate Credit
  • Remind you to file your 2021 tax returns to become eligible for your remaining stimulus payments
  • Urge you to go online to check your IRS account for Economic Impact Payment balances

 

5. Use Online Resources Before Calling the IRS

The IRS has a rich library of online resources covering the topics people ask the most. They encourage taxpayers to consult with these resources before giving them a call.

The notoriously long wait times for calling the IRS have not changed. Given recent changes people don’t regularly deal with, you can safely assume long hold times will still take place.

For your own sake and for the sake of IRS staff, the service encourages taxpayers to check their IRS accounts for information and updates. Likewise, they want you to take advantage of their comprehensive online resources.

 

6. If You Are Still Waiting for 2020 Tax Returns…

The IRS suggests you enter $0 for adjustable gross income for your 2021 tax return. If you used a non-filer tool for advance Child Tax Credit or third Economic Impact Payment, they suggest you enter $1 instead.

If none of this applies to you, you will end up needing to simply enter your accurate adjustable gross income.

For those who used a Non-Filer tool in 2021 to register for an advance Child Tax Credit or third Economic Impact Payment in 2021, they should enter $1 as their prior year AGI. Everyone else should enter their prior year's AGI from last year's return.

The 4 Key Things Every Canadian Should Know About Paying Their Taxes 

 

What Happens If You Don’t Pay Taxes?

There are a series of negative consequences for failing to pay your taxes on time.

Fees and Penalties

The longer it takes to pay the IRS, the more their fees and penalties grow. Penalties are broken down into 4 categories:

  • Failure to file
  • Failure to pay
  • Dishonored checks
  • Failure to pay estimated tax

The first consequence is always upfront penalties. The second is a simple “failure to pay” penalty. In rare cases, failure to file may lead to fraud charges as well. The longer it takes you to pay, the more interest will accrue, increasing the cost of your taxes.

Once you pay your taxes, you will stop being charged interest and penalties.

 

 

Make Sure You Still File!

In the most extreme cases, failing to file or pay your tax in the US can lead to criminal charges. However, there are several things you can do before you get there to reduce your tax burdens.

1. File for Extension

If you know you’ll have trouble meeting the first tax deadline, you can file for an extension.

This is the first step you should take when experiencing complications paying your taxes. It’s an easy step to take that will at least buy you some time. If that’s not enough, you need to move on to the next step.

2. Make an Installment Plan

You can make an installment payment plan with the IRS by filing a Form 9465. You can still make an installment plan after filing for an extension.

Installment plans make paying taxes easier by spreading out your payments.

Photo by Firmbee.com on Unsplash

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