Wednesday, February 2, 2022
February 2022 Financial Update
Winter is here, and with it comes tax season. For bookkeepers, January meant a lot of tax season prep work, like W-2s and 1099s for workers and getting the books closed for the previous year. For tax accountants, the work is just beginning.
But how does it look over at the IRS right now? Well, the IRS has problems.
According to the Taxpayer Advocate’s annual report to Congress, 2021 was really bad. In fact, they said that “there is no way to sugarcoat the year 20212 in tax administration: From the perspective of tens of millions of taxpayers, it was horrendous.” The Advocate reported long refund delays, broken online website tools, processing delays, fewer responses to notices, and the taxpayer advocate service itself wasn’t always able to provide timely assistance. Although COVID was acknowledged as a problem, long-term underfunding of the IRS was targeted as the biggest problem, a problem that has been a known issue for some time (the Taxpayer Advocate was talking about it back in 2012).
2022 doesn’t look much better. The IRS is already warning of a messy and delayed tax season, starting the year with a backlog of millions of taxes that weren’t processed from last year. And IRS employees are miserable, underpaid and way overworked, and sometimes targeted by people who don’t much like the IRS.
The tax season officially began on January 24, 2022, but don’t expect an immediate refund with a frustrating, delayed and overwhelming tax season approaching.
Update! Just three days after tax season began, the IRS announced that many automated notices would not be sent because they were confusing taxpayers. Many notices were incorrect due to the backlog in processing returns. The hope is to cut down on the paper backlog and increase resources for processing those 6 million unprocessed individual returns from 2020 and 2021.
2022 Financial Calendar – January & February:
January is goal time for your organization. What do you hope to accomplish, and what are the short- and long-term ideas, costs, and plans that need to be worked through in order to accomplish your goals? I always set myself realistic goals for new business each year, and try to plan what work I will need to do in order to accomplish those goals. I also set a goal for time spent volunteering at nonprofits.
February’s work revolves around taxes. You should have distributed W-2s and 1099s in January. Now February is a time to gather and organize all the documents that you received, both business and personal. Your tax accountant may also send you a tax organizer at this time – if they haven’t, ask for one, and start getting it ready. The sooner your ducks are in a row, the sooner you (or your accountant) can file your taxes and finish. You can also look at retirement contributions this month, and see if you can beef up your accounts this year, which would also decrease your taxable income.
2022 Tax Updates and Dates
Parnerships and S-Corporations with an extension, your taxes are due! For a full list including payroll tax deposit dates, see the IRS Tax Calendar.
- January 18: Final installment of 2021 estimated tax due on Form 1040-ES.
- January 31, Payroll: FUTA Tax deposit for all tax through December 2021. File forms 940, 941, 943, 944, and 945 for payroll taxes.
- January 31, Forms: Furnish forms 1098, 1099 and W-2 to recipients for payments during 2021.
- February 15: Furnish Forms 1099-B, 1099-S and certain 1099-MISC to recipients.
- February 28: File Forms 1096 with information returns, including Forms 1098, 1099 and W-2G for 2021 payments.
What’s Afoot in the Government
Most pandemic help for small businesses has been discontinued or is winding down, including programs for restaurants and for shuttered venues like performing arts organizations. Some of those shuttered venues were denied assistance by the SBA though, and are filing claims against the SBA. PPP loans continue to wind down and be finalized as well, while some people who defrauded the program get convictions.
Otherwise, the impending tax season and all the IRS issues are the biggest government stories.
What’s Happening, in Charts
Inflation has been on the top of people’s minds lately. The US Bureau of Labor Statistics reports below on the Consumer Price Index as of December 2021. The Bureau reports that, “Over the last 12 months, the all items index increased 7.0 percent before seasonal adjustment.” They reported also that prices in December rose to a 40-year high.
Other charts show that inflation has particularly increased since March of 2021. Energy prices have a lot to do with that, as shown in the Consumer PRice Index, but other costs have risen over time, as illustrated on the charts in this news article from the Washington Post.
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