What Is Tax Season?
Tax season is the time period, generally between Jan. 1 and April 15 of each year, when individual taxpayers traditionally prepare financial statements and reports for the previous year and submit their tax returns. In the U.S., individuals typically must file their annual tax return by April 15 of the year following any reportable earnings. Tax returns submitted after the end of tax season are subject to late penalty fees and interest charges.
The Internal Revenue Service (IRS) has announced that the U.S. tax season begins on Monday, January 24, 2022, which is when the IRS begins accepting and processing 2021 tax year returns.
- Tax season is when individuals and businesses prepare and file their income taxes.
- In the United States, tax season is typically Jan. 1 until the April 15 filing deadline, although Jan. 24, 2022, is when the IRS will begin accepting returns for the 2021 tax year.
- During tax season, employers, financial custodians, and other entities that generate income for individuals must provide documentation and statements for tax preparation purposes to ensure taxes are filed on time.
Understanding Tax Season
Tax season is the period within which all income taxes must be filed up until the deadline. The deadline each year is typically April 15. However, if this date falls on a weekend or holiday, it is moved to the next business day. For instance, in 2022, Emancipation Day in Washington, D.C., falls on April 16, which is a Saturday. Therefore, it will be officially observed in the Capital on the closest weekday, April 15. That holiday observation will close the city and federal offices in D.C., including the IRS.
As a result, taxpayers have until Monday, April 18, 2022, to file their 2021 tax returns and pay any taxes due. Tax returns submitted after this date are subject to late penalty fees unless you are a resident of Maine or Massachusetts. In those two states, taxpayers have until Tuesday, April 19, 2022, because April 18 is Patriots' Day.
Emancipation Day commemorates the day President Abraham Lincoln signed the District of Columbia Compensated Emancipation Act in 1862. The Act freed 3,000 enslaved people in the area and has been observed in D.C. since 2005.
During tax season, businesses must furnish employees, contract laborers, and others, such as royalty earners, with tax documents specifying data required to complete an individual's tax returns. People who are required to file a tax return generally must do so before April 15 or request an extension.
Tax season is a busy period for many tax preparers and accounting professionals. The three-and-a-half-month period at the beginning of the year is the time when the necessary paperwork, including wage and earnings statements (such as 1099s or W-2s), is collected to assemble tax returns.
While some individuals calculate their own tax returns, many rely on the expertise of tax preparers and accounting professionals to be certain the paperwork is filed correctly and to improve the financial outcome of the tax return. An individual who earned $73,000 or less (in 2021) can file taxes for free through the Internal Revenue Service (IRS) Free File program. Individuals must file federal, state, and, in some cases, local tax returns.
The IRS advises that all taxpayers keep copies of their prior-year tax returns for at least three years. In the event of an IRS audit, a taxpayer will be required to present the last three years of their documents. In extreme cases, such as suspicion of fraud, they will be expected to show seven years of documents.
For the tax year 2022. according to the IRS, a taxpayer with gross income (all income from all sources) of more than $12,950 will have to pay federal tax. Independent contractors, or what the IRS refers to as "non-employee compensation," must file a return and pay self-employment taxes on any net earnings from self-employment of $400 or more.
The deadline for employers to file and send W-2s to employees is Jan. 31. Businesses that hire independent contractors must send these nonemployees Form 1099-NEC as of the 2021 tax year. This form replaced 1099-MISC, which still remains in effect for payments made for things like rent, prizes, health care, among others.
Although the deadline to file your taxes is nearly always April 15, there are cases when the IRS may have to extend it. That was the case with the as was the 2020 federal tax year. The agency extended the filing date for individuals until May 17, 2021, due to the coronavirus pandemic.
A further extension was granted to those living in Texas, Oklahoma, and Louisiana because of the winter storms that hit those states in February 2021. The deadline for individuals and corporations to file their 2020 tax returns was pushed to June 15, 2021. Then the following spring storms caused enough damage to Tennessee as well as parts of Alabama and Kentucky to grant further extensions.
Why Filing Early Can Make Sense
Even though many taxpayers file their tax returns on or by about April 15 every year, there is no need to put it off until the last minute. Indeed, filing an early tax return can make sense for a variety of reasons.
The IRS begins accepting and processing 2021 tax year returns on Monday, January 24, 2022. Even if you don't file early, there are reasons to begin preparation as soon as you can.
Starting your filing process early gives you the time you need to collect the evidence needed to claim all of your deductions. You will avoid the headache of the middle of the night stress over figures and receipts. Your accountant will have a more flexible schedule and will probably be able to start working on your accounts immediately. Also, by filing early, you will short circuit would-be identity thieves.