Daily Money - Why Tax Season Will Be a Mess This Year

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January 18, 2022

All signs point to a messy tax season ahead. Even as the season opens next Monday, the IRS is struggling with a backlog of returns from last year. Chronic underfunding and the complexity of pandemic relief programs only exacerbate these processing delays. “The outlook for the upcoming filing season is bleak,” says a report from the Taxpayer Advocate Service, an independent watchdog and advocacy group within the IRS. That said, there are steps you can take in an effort to speed your return’s processing, including filing electronically and double-checking your math. Learn more about them in today’s edition, and start gathering your paperwork.

Best wishes,
 
 
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Timely Retirement News, Insights and Advice

The IRS is overwhelmed, according to an internal report.

But they don’t seek professional help.

Here are key details about the government's new plan.

Reader of the Week

Please welcome our Reader of the Week! Kevin O’Neil, 66, lives in Chicago and is a former journalist, marketing professional and chief of staff to a Chicago alderman.

What are you up to these days?

I retired at age 64. My wife and I downsized our home a year later, in March 2020, closing on it the week before the pandemic closed everything. We bought a three-unit graystone on the Southwest Side of Chicago, living on the first floor, with my wife using a small basement apartment as her art studio. Our daughter and son-in-law live on the third floor, with friends renting the second floor. Their rents cover our mortgage! And we have our own built-in pod for the pandemic.

As for living space, we used to have a total of 3,500 square feet, but now have about 2,000 — 1,350 in our main living space on the first floor, and another 650 in my wife’s basement studio.

I volunteer teaching English to immigrants. For the last 20 months, I have also managed the rehab of our 120-year-old building. Now it’s in great shape. Our daughter and her husband love the place and plan to live here long after we’re gone.
 
Nice! Any advice you'd like to share for others about preparing for/living in retirement?

Check in with a certified financial planner at least five years (or more) before you plan to retire to make sure your savings are up to snuff. Always save as much as you can, certainly at least enough to qualify for your employer’s 401(k) match. I always added raises to my savings.

I try to keep it simple on investing. Right now, I am investing in four Vanguard funds: a U.S. stock fund and a bond fund, and an international stock and a bond fund. In retirement, I changed my allocation to 50/50 stocks and bonds, but was heavier in stocks before retirement.

Everyone is living longer these days, so we plan to wait until I’m 70 to draw Social Security. My wife is four years younger than me, so I feel she will be taken care of, between Social Security and our savings.

Smart! Any regrets you’d like to share (money-related or otherwise)?

I should have started saving for retirement earlier. I started at age 30. Luckily, I have been able to save enough to make up for my delayed start. I urged my daughter to start young — and she did, at age 22.

Retirement News From Around The Web

The Last Chance for Some Filers to Avoid a Tax Penalty Is Jan. 18
The deadline for fourth quarter estimated payments is today. CNBC

Timely Tips for Filing Your 2021 Tax Return
Make sure you’re signed up for direct deposit, among other tips. NEXT AVENUE

The Politics of Going Gray
Assistant Speaker of the U.S. House of Representatives Katherine Clark reflects on her decision to stop dying her hair. WBUR

‘Great Resignation’ Creates Job Opportunities for Retirees
Whether it’s a financial necessity or just because you want to, returning to some form of paid work has gotten easier for retirees. AARP

Elizabeth O'Brien is deputy editor at Money. She has covered retirement and health care for nearly a decade. A Brooklyn resident and mom of two boys, she navigates the alphabet soup of Medicare and the New York City subway system with equal ease. You can email her at elizabeth.obrien@money.com and follow her on Twitter at @elizobrien.

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