The new year brings notable changes in the financial field. Tax issues will feature prominently, but there are also developments involving investments, credit reports and more.
Here are some of the money-focused trends that will be of interest to many as we head into 2022:
Fewer free file options
The Internal Revenue Service opened its Free File program for the upcoming tax season, but with the departure of a major tax software participant. Only eight partner companies remain in the program, allowing taxpayers to file returns for free. That’s down from 11 participants in 2018.
It should be noted that TurboTax no longer participates after almost 20 years in the Free File program. According to parent company Intuit, more people have filed free returns using TurboTax in recent years than across all other tax preparation software companies combined.
Intuit cited limitations on tax preparation companies that participate in the Free File program, conflicting demands, and an inability to pursue other goals. This includes soliciting taxpayers to help them increase their income, increase their savings, pay off their debts and more.
“We can help more customers access their reimbursement faster and at no cost, tap into expert resources at will, choose to use their own data to better budget, save and invest – all of which we can’t. do effectively under the Free Files Program,” the company said in a blog post.
Of the eight software companies still participating, five allow free filing for people earning $73,000 or less, but the other three have lower income limits. Six will file free returns for people of all ages, but two have age restrictions. Some programs do not prepare free federal returns for people in every state. Only two programs will file free tax returns for residents of all tax-collecting states.
More information about the different software programs and eligibility requirements can be found at irs.gov, under the Free File program.
More financial transparency to come
Regulations that could help retirement investors get better advice, and potentially lower their costs, come into force on February 1. The U.S. Department of Labor’s Fiduciary Rule 3.0 imposes certain obligations on advisors who provide recommendations for Individual Retirement Account transfers and other situations.
Advisors will now be required to explain the benefits, costs and any conflicts of interest on financial recommendations, and provide sufficient documentation. The new regulations apply to brokers, insurance agents and other financial advisers.
IRA rollovers, especially when they come from 401(k) retirement plans, are among the most important investment decisions many people face — and a major focus of the new regulations. But the new rule could also apply to other employer-sponsored benefit plans, Roth IRAs and more, said Ryan Brown, corporate attorney at financial firm CR Myers & Associates and M&O Marketing.
Trustees generally cannot receive payments that create conflicts of interest when providing advice. A conflict can arise, for example, if an advisor is paid more for recommending certain investments rather than others that are in an investor’s best interest.
For investors, Brown said the new rule should mean better service, more details about an adviser’s compensation, the ability to lower fees and disclosure of any conflicts of interest. For example, prices offered by financial firms to advisers for the sale of certain products are likely to disappear, he said.
“If an adviser is giving advice or recommendations on qualified (retirement plan) money, there is a good chance that he or she will be considered a fiduciary or must at least act in the best interest of a customer,” Brown said.
If an adviser refuses to discuss compensation or conflicts or disclose other information, consider going elsewhere, he suggested.
Tax returns and refunds may experience delays
The country’s tax season begins on January 24, when the IRS and various states, including Arizona, begin accepting and processing returns. Taxpayers should anticipate delays, with the coming year possibly worse than 2021.
Last year, “tens of millions of taxpayers were forced to wait extraordinarily long periods of time for the IRS to process their tax returns, issue their refunds, and address their correspondence,” noted Erin Collins, the National Taxpayer Advocate, an independent watchdog of the IRS. , in a recent report to Congress.
As more than 75% of returns result in refunds, “the processing delays have caused financial hardship for some taxpayers and extreme frustration for many others,” she noted, adding that the IRS is deferring still “millions of unprocessed returns and millions of pieces of taxpayer correspondence” as it prepares for the upcoming filing season. Refunds averaged $2,775 last year.
Additional complications await many taxpayers, such as the need to reconcile advanced child tax credit payments received last year with amounts for which recipients are eligible.
“The unprecedented processing and refund delays experienced by taxpayers in 2021 could be just as severe, if not worse” this year, particularly if taxpayers do not file their returns electronically, Collins warned.
It doesn’t help that of the 282 million phone calls made to the IRS last year, only 11% were answered by a customer service representative.
The situation has prompted 11 organizations to ask the IRS to “reduce unnecessary burdens on taxpayers” and provide “reasonable penalty relief” this year. The coalition includes the American Institute of CPAs, the National Association of Enrolled Agents and groups representing African Americans, Latinos, small businesses and others.
Credit errors could pose problems
If you’re planning to borrow money this year, now is probably a good time to check your credit report for errors. Mistakes can lower your credit score and make loans more expensive. According to a new analysis from the federal Consumer Financial Protection Bureau, the big three credit reporting agencies are not doing a good job of responding to complaints and, if necessary, correcting them.
In 2021, Equifax, Experian and TransUnion together reported relief in response to just 2% of complaints, up from nearly 25% two years earlier.
Credit reports play a key role beyond just borrowing. More than 200 million Americans have credit records, and lenders rely on this information to decide whether to approve loans and on what terms. The reports can also affect decisions about employment, insurance, housing, and even access to public services.
Consumers submitted more than 700,000 complaints to the CFPB regarding Equifax, Experian and TransUnion from January 2020 to September 2021, which represented more than 50% of all complaints during this period. Consumers often claim that inaccurate information in their files belongs to someone else. The complex area of medical billing was an area of particular concern.
The CFPB said the three credit bureaus often issue template responses rather than individualized responses. He also claimed that Equifax and TransUnion often promise to investigate complaints but do not inform the agency of the results.
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