Taxpayers get Crypto Jolt in an otherwise surprisingly normal season

(Bloomberg) — The 2022 tax season, which some predicted as a perfect storm, is coming to an end with barely a strong wind.

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For the first time in three years, the scheduled deadline – April 18 – will be met, as the Internal Revenue Service has come to be largely able to handle the processing of millions of individual returns despite ongoing complications from the pandemic. Delayed due dates for 2020 and 2021 returns had confused taxpayers and created last-minute chaos within the IRS to update systems.

“For most taxpayers who have fairly straightforward taxes, who file returns online and choose direct deposit, this process — for the most part — has been seamless,” said Mark Jaeger, vice president of operations. taxes at TaxAct, a tax specialist. – Preparation software company.

It’s a stark contrast to the picture in January, when Treasury officials warned to prepare for a difficult and frustrating season, with processing delays and customer service shortages. A change in the way the child tax credit was administered in 2021, with half of it distributed in monthly installments, meant some might have seen smaller refunds than in previous years.

The average refund so far for 2021 is $3,175, or 9.9% more than in 2020. This is likely the result of multiple credits that were extended under the US bailout of 1 $.9 trillion from President Joe Biden.

A surprise to many: growing IRS attention to transactions in digital currencies and non-fungible tokens. While a law requiring IRS notification of transfers of at least $10,000 in cryptocurrency doesn’t come into effect until 2023, the agency has reporting requirements for acquisitions and sales on individual returns.

This surprises many new crypto owners who don’t yet realize the IRS is asking for the data, said Mike Greenwald, a partner at accounting firm Friedman LLP.

“It requires a conversation that customers weren’t expecting to have,” Greenwald said. “They don’t think about digital currencies the way the IRS does.”

More generally, those who have participated in the type of retailing popularized by Robinhood find the need to account for how they have behaved.

Day traders

Nicole Rosen, a Washington State-based tax preparer, has noticed a significant increase among her clients of people using services like Robinhood to buy and sell stocks. This requires additional forms and adds to the complexity of tax returns.

In the past, about a third of the statements Rosen prepared reported stock trades, she estimates. Now it’s closer to 80% to 90%. The average time to complete a declaration has therefore fallen from two hours to four hours. New automated IRS tools, such as a platform to upload power of attorney documents, have saved time in other areas, Rosen said.

The IRS worked hard on its own documents. The backlog of paper returns reached a record high of 24 million this year. IRS Commissioner Chuck Rettig said that should be down to the normal level of less than a million by the end of the year.

With less remedial work to focus on, the IRS may now be in a better position to step up audits of the wealthy, as progressive Democratic lawmakers are advocating.

No Jinxing

The IRS recently won approval for an accelerated hiring process to recruit up to 10,000 new employees, half of whom will be hired in the coming months. Rettig said this will help improve customer service and speed up processing times.

“IRS employees want to do more to help taxpayers,” Rettig said in testimony before the Senate Finance Committee this month. “We want to be able to answer the phones and answer questions.”

Read more: House Democrats’ Proposed Outline for Tax Reforms

Tax professionals, who have been scarred over the past two years helping their clients manage the ever-changing pandemic payments, Paycheck Protection Program loans and unemployment benefits, worry about hurting the possibility of easier tax seasons ahead.

“We’re hoping there won’t be any changes that create the mechanical chaos that’s happened over the past two years,” said Bret Scholl, a California-based CPA. “But when things are so fluid and unpredictable, I’m hesitant to predict just about anything.”

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