Talking tax season tips with the U of M

Talking tax season tips with the U of M

From navigating policy changes to organizing piles of paperwork, filing taxes can be a stressful time. 

Tammy Naples, a certified public accountant (CPA) and senior lecturer in the Master of Business Taxation program at the University of Minnesota Carlson School of Management, shares her insights for tackling this year’s tax season.

Q: What are some of the biggest challenges this tax season?

Naples: One of the biggest challenges in the industry is the shortage of tax CPAs. This shortage has been growing for many years and was intensified when many accountants left the workforce during the pandemic. To practice as a CPA in Minnesota, it’s required to have 150 credit hours of education. The Minnesota Society of Certified Public Accountants recently proposed legislation to broaden the pathways to become a CPA, including reducing the credit hour requirement from 150 hours to 120 hours. For now, the shortage is still a factor, which means it may be harder to schedule an appointment with a CPA this year.

Q: What is your best advice to make tax preparation go easier?

Naples: Start to accumulate your documentation and paperwork early! Many people are accustomed to receiving all of their tax documents by mail, but more and more organizations today are going digital. That sometimes causes confusion because people don’t realize they need to log in to their employer’s or financial institution’s website to download their tax documents. Also, updating your bank routing information is important. Many refunds get delayed because people use the banking information from the previous year’s tax return, which may not be current. 

Q: Should I expect a big refund this year?

Naples: Tax situations vary greatly from household to household, but in general, taxpayers are likely going to have smaller refunds or larger payments this year. Many of the provisions that were in place in 2020 and 2021, such as the more generous child tax credit, have now expired. We’re back to pre-pandemic policy and that may be a little bit of a surprise when making those final calculations.

Q: Are there any significant tax rule changes this year?

Naples: A topic that comes to mind is confusion around information reporting requirements.  Form 1099-K is required for reporting transactions from payment cards and third-party networks, such as PayPal or Venmo. For many years, the reporting threshold for third-party payment transactions was $20,000 and more than 200 transactions. A lower threshold of $600 and any number of transactions was enacted as part of the American Rescue Plan of 2021. This change was scheduled to take effect for the 2022 tax year. However, in December of 2022 the IRS announced that 2022 would be a transition year. Understandably, this is causing a lot of confusion. Some platforms are already making the switch to the lower threshold, while others aren’t.

The bottom line is the income received on these platforms—whether you received a 1099 or not—is still taxable, just like it was in previous years. Keep in mind, this is just for income transactions where you’re receiving payments for goods or services. This does not affect transactions between friends and family or expense sharing (if you used Venmo to split a restaurant bill).

Q: When is the tax filing deadline this year?

Naples: The tax deadline is typically April 15, which falls on a Saturday this year. Then, Monday is Emancipation Day, which is a legal holiday in the District of Columbia. So this year Tax Day is on Tuesday, April 18. If you file an extension, that deadline moves to October 16.

Even if you get an extension for filing your tax return, it doesn’t mean you have an extension to pay your taxes. For people who are extending and know they owe, I would recommend that they make a payment so they won’t be subject to interest or penalties.

Tammy Naples is a senior lecturer in the Accounting department at the Carlson School of Management. Prior to joining the Carlson School, Naples was a tax director at Carlson Companies, Inc. She also spent 10 years in public accounting at Deloitte Tax and Arthur Andersen, specializing in corporate tax consulting and tax accounting methods and periods. Naples joined the University in 2010 and teaches graduate and undergraduate tax and accounting courses.

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