What You Need to Know
- There are now reporting requirements for acquisitions and sales of digital currencies and non-fungible tokens on individual returns.
- The average refund so far for 2021 is $3,175, 9.9% higher than in 2020, likely due to several credits expanded under President Joe Biden’s $1.9 trillion American Rescue Plan.
The 2022 tax season, predicted by some to be a perfect storm, is coming to a close with barely a stiff wind.
For the first time in three years, the scheduled deadline — April 18 — will be met, as the Internal Revenue Service ended up largely being able to manage processing the millions of individual returns despite continuing complications from the pandemic.
Delayed due dates for 2020 and 2021 returns had sown confusion for taxpayers and created a last-minute chaos within the IRS to update systems.
“For most taxpayers who have fairly simple taxes, and they e-file and they choose direct deposit, that process — for the most part — has been very smooth,” said Mark Jaeger, VP of Tax Operations at TaxAct, a tax-prep software company.
It’s a big contrast with the picture in January, when Treasury officials warned to gird for a challenging and frustrating season, with processing delays and customer-service shortages.
A shift in how the child tax credit was administered in 2021, with half of it distributed in monthly payouts, meant some might have seen smaller refunds than past years.
The average refund so far for 2021 is $3,175, 9.9% higher than in 2020. That’s likely the result of several credits that were expanded under President Joe Biden’s $1.9 trillion American Rescue Plan.
One surprise for many: an increasing attention by the IRS to transactions in digital currencies and non-fungible tokens. While a law requiring notification to the IRS of transfers of at least $10,000 in cryptocurrency doesn’t take effect until 2023, the agency does have reporting requirements for acquisitions and sales on individual returns.
This is surprising many new crypto owners who don’t yet realize that the IRS asks for the data, Mike Greenwald, a partner at accounting firm Friedman LLP, said.
“It requires a conversation that clients weren’t expecting to have,” Greenwald said. “They don’t think about digital currencies the same way the IRS does.”
More broadly, those who’ve participated in the the kind of retail trading popularized by Robinhood are finding the need to account for how they’ve fared.