FREE NEWSLETTER
TAX SEASON IS HERE. You’ve probably received your W-2 and, if they haven’t arrived already, your investment tax forms may be just days away. If you’re like me, your email inbox has been inundated with tax-filing services pitching their latest deal. I’m no expert on which tax-prep provider is best, but each year I check this page for reviews of the major sites.
I have two other tips that might save you a few bucks. First, see if your brokerage firm offers a discount on sites like TurboTax and TaxAct. Second, your credit card might have a cashback offer if you use one of those sites. It’s not much, but those small savings can help shave your tax-prep fee.
I’m curious to see how this tax season goes, given 2021’s frustrations—including refund delays—that resulted from IRS staff shortages and a slow postal service. Ally Bank Consumer Research performed a survey late last month that suggests filers have low expectations.
The survey says 51% of consumers expect another season of delays. To speed things along, the IRS recommends Americans submit returns electronically—but 81% of folks already do. Ally’s survey of more than 1,000 consumers also found that half of respondents expect a refund. Among that group, 63% planned to file in January or February.
The average refund was $2,827 last year, according to the National Taxpayer Advocate. Two-thirds of those Ally surveyed expect refunds of $3,000 or less. What will recipients do with their windfall? Among those expecting a refund, 55% plan to save it, 33% will use it to pay down debt and 30% will invest part or all of it. Of those planning to invest, 57% are looking to traditional financial markets, while 28% are considering rolling the dice with cryptocurrencies.
Ormode, I’d be interested in knowing what kind of tax return you have that can’t be filed electronically. Even amendments can now be filed electronically, but this is a recent change.
Gift tax returns forms 709 are still all paper.
Thank you.
The IRS should try to improve their system so that all taxpayers can submit electronically. I am still stuck sending in a paper form because it is required by IRS regulations, and the limitations of what can be submitted electronically.
They’re the ones asking for electronic submission – how about it?
It’d be nice the IRS just told us what we owe. They seem to have all the info (at least in my case)!
Thanks, Mike, for these tax season reminders. While on the subject of taxes, what do you and other readers think of e-filing security risks? I use H&R Block tax software but still paper-file. I recall seeing a disclaimer from H&R Block that they securely store the filing data. To me, “securely” sounds great, but “store” doesn’t.
Thanks! I’ll defer to William P as the CPA.
As a CPA I have seen correct self prepared paper returns cause IRS notices when an inadvertent input error by the IRS causes a mismatch with electronically filed source documents. Refund of any claimed over payment on a paper return will be slow. I have more faith in the tax software company to protect my data than a overworked and understaffed IRS. When security is a major concern the IRS now allows you to obtain an annual PIN number before fraud occurs. The IRS and industry have a security summit who makes recommendations on how to protect your data. You can read about it here https://www.irs.gov/newsroom/security-summit. I hope this helps.
Right on cue – The National Taxpayer Advocate testified to the Senate Committee on Finance yesterday 2-17-22 on the problems the IRS is having with the processing of paper filings. You can read about it here – https://www.irs.gov/pub/irs-utl/national-taxpayer-advocate-testimony-senate-finance-hearing-on-cust-serv-challenges-02-17-2022.pdf
My suggestion with the tax refund is to buy I-bonds. A taxpayer can direct the IRS to send up to $5000 of your refund to the Treasury to purchase paper I-bonds. This is in addition to $10,000 that individuals may purchase annually through Treasury Direct.
The bonds are free of state taxes, are federal tax-deferred until redemption, and pay 7.12% for six months.
Better than rolling the dice with crypto-currencies and the like.
Given concerns regarding back log of refunds – is there a guarantee that they would be ‘purchased’ prior to April 29, 2022 when using the tax refund option? I worry about missing the current rate (and am guessing the May 2022 new rate will be similar given the trajectory of CPI-U).
Second question, has anyone used Turbo tax for this? Any tips or warnings would be greatly appreciated.
I’m sure most readers of HD have seen this great site but wanted to mention it in case they had not (this page tracks the CPI-U and how that affects the next I-Bond rate): https://tipswatch.com/tracking-inflation-and-i-bonds/
Be aware that FreeTaxUSA does not support the I bond option. I wanted to do this. Since I already had the time invested on the FreeTaxUSA site, I opted out on the opportunity. Fortunately I did take advantage of purchasing I bonds last year and this year after reading articles here on Humble Dollar.
I think I’m good with my $20k in I bonds between last year and this year.
I made an additional estimated payment so that I could buy a $5,000 I-bond. The CPA I’ve been using for 30 years said I was his first client to do this. Of course, with the IRS backlog, it may be a while before the bond is issued. One thing I wasn’t aware of is that you can only get your refund bond as a paper certificate.
I think you will get multiple paper I bonds. From the Treasury Direct Website: If you buy more than $250 of savings bonds, we will use $50 denominations to fill the first $250 and the fewest possible number of additional bonds for the remainder. For example, if you request $1,000 in paper I bonds, you will receive six $50 bonds, one $200 bond, and one $500 bond.
It is pretty easy to convert your paper I-bond to an electronic one if you want to. Check the Treasury Direct website for details.
Good to know, Jim. Thanks!