Excessive delays in processing tax returns and tax refunds ranks as the No. 1 most serious problem facing taxpayers, according to National Taxpayer Advocate Erin Collins’ annual report to Congress released today. It was tough last year, and it looks like it’s going to be tough this year, too.

The Internal Revenue Service announced this week that the 2022 tax season filing start date—when you file your 2021 tax return—is Monday, January 24. Meanwhile, millions of people are still waiting for their 2020 tax year tax refunds. And the taxpayer advocate is warning of refund delays this tax season.

“I am deeply concerned about the upcoming filing season. Paper is the IRS’ Kryptonite, and the agency is still buried in it,” said Collins. How bad was it last year? Taxpayers faced long processing and refund delays, difficulty reaching the IRS by phone, correspondence that went unprocessed for many months, collection notices issued while taxpayer correspondence was awaiting processing, limited or no information on the Where’s My Refund? tool for delayed returns and difficulty obtaining timely assistance from the Taxpayer Advocate Service, an independent organization within the IRS that Collins heads up. Last year, TAS got more than 66,000 congressional referrals, six times the pre-pandemic level of inquiries.

Millions of e-filed returns were held up as the IRS issued math error notices because of discrepancies related to 2020 tax year stimulus payments. The most common error (11 million returns) was around Recovery Rebate Credit claims by taxpayers who didn’t get stimulus payments. The mismatch triggers a math error notice; a taxpayer’s response go into the paper pile; and any refund is further delayed. Paper returns were taking up to eight months to process, and there were cases where amended returns took more than a year to process.

Millions of discrepancies—and math error notices—remain likely this year, too, Collins warns, as taxpayers have to reconcile the third stimulus payment paid out in 2021 as well as any 2021 monthly advanced child tax credit payments on their 2021 tax returns. The child tax credit payments apply to almost everyone with kids—36 million taxpayers. To avoid tax refund delays, make sure you have IRS letters 6419 and 6475 on hand before you file. File electronically and choose direct deposit.

How bad is the backlog going into this filing season? The latest Covid operations statistics, as of January 7, show that the IRS still had 6 million unprocessed 2020 individual tax year returns as of December 23, 2021. In addition, as of January 1, there were 2.3 million unprocessed amended individual tax returns, and as of January 5, there were 2 million unprocessed employers’ quarterly tax returns (Forms 941 and 941-X).

The IRS backlog includes about 5 million pieces of taxpayer correspondence—with some of these submissions dating back at least to April and many taxpayers still waiting for their refunds nine months later, according to the Taxpayer Advocate report.

IRS filing statistics as of December 3, 2021, showed 168 million individual income tax returns processed. Of those, 77% were issued refunds. Average refunds came in at $2,815.

Tax refund delays cause real problems for people, with a disproportionate impact on low-income taxpayers. “The financial impact can range from mild inconvenience to severe financial hardship,” Collins says.

Collins says that the IRS “deserves credit for playing the hand that it was dealt.” Congress has charged the IRS with administering Covid relief—stimulus payments, advanced child tax credits and the $10,200 unemployment benefits tax exclusion. And the number of taxpayers the IRS serves has been going up while the IRS workforce numbers and budget have been going down. Since FY 2010, the IRS’ workforce has shrunk by 17%, while its workload—as measured by the number of individual return filings—has increased by 19%.

How can Congress help? The Taxpayer Advocate calls for Congress to beef up its funding to the IRS so it can improve the taxpayer experience and modernize its IT systems.

Credit: Forbes https://www.forbes.com/sites/ashleaebeling/2022/01/12/taxpayer-advocate-warns-of-tax-refund-delays-irs-buried-in-paper

(Bloomberg) — A central part of the “American Dream” is to buy a house, pay it off over time and retire with hundreds of thousands of dollars of equity in the home.

Student-loan burdens are upending this scenario, according to a study from the Jain Family Institute that found the rise in student debt has become a major obstacle to purchasing a home — especially among relatively high-income young borrowers.

The research brings into question the value of a college degree. For young adults earning $100,000 or more, higher student debt corresponds with lower homeownership in each year of the 10-year study.

Overall, the rate of homeownership among student borrowers age 18 to 35 has dropped 24% in the decade through 2019, the report shows. People living in Black and Asian communities saw the biggest declines — even as they started with the lowest rates back in 2009.

Owning a home has traditionally played a key role in building financial security for millions of Americans. In 2019, homeowners had a median net worth of $255,000, compared with $6,300 for renters or others, according to a 2020 Survey of Consumer Finances from the Federal Reserve.

Researcher Eduard Nilaj, author of the Jain report, said by email that the freeze in student-loan payments since the beginning of the pandemic — recently extended by another three months — may have enabled some mid- and high-income student-loan borrowers to buy a home. But the surge in house prices has also been a deterrent.

Only debt cancellation or a large reduction in interest rates would likely make an impact on home ownership.

As the pool of Americans attending college increases, the average student borrower is getting poorer, Nilaj found. And as higher-education fees have increased, so have the amount of student loans.

From 2009 to 2019, the median estimated income of student debtors in the Jain sample shrank to $67,364 from $82,765. At the same time, the share of people with outstanding student-loan balance of $25,000 or more soared.

“Rather than paying a mortgage for a house, young people pay student-loan debts that are mortgage-like, both in the scale of outstanding balance and length of term,” Nilaj, who tracked more than 800,000 student-loan borrowers, wrote in his report. “While a decline in homeownership is just one of the many concerning trends shaping the lives of young Americans, its pervasiveness may signify a new normal.”

Credits: Yahoo Finance https://finance.yahoo.com/news/student-loan-burdens-upend-american-145608695.html?guccounter=1

Thousands of people with student loan debt will have their debt canceled or receive a one-time check as part of a multistate settlement with one of the nation’s largest student loan servicers.

Navient, the Wilmington-based company, was accused of encouraging borrowers to pause payments through forbearance rather than directing them to lower-cost repayment plans tied to their income. Although Navient denies the charges, the settlement ends probes by multiple states into the company’s practices and will affect thousands of people whose loans are serviced by Navient.

The loans in question were mostly originated by Sallie Mae between 2002 and 2014 before Sallie Mae spun off its student loan services as Navient in 2014. The agreement will result in the cancellation of $1.7 billion in student loans. Another $95 million will be distributed in restitution payments worth about $260.

How do I find out if I will benefit?

Those who will have private loan debt canceled will be notified by Navient no later than July. They will receive a refund for payments made after June 30, 2021.

Borrowers who are eligible for the $260 restitution payment will receive a postcard from a settlement administrator this spring.

Borrowers who qualify for either debt forgiveness or a payment do not need to take any action other than making sure their studentaid.gov account is up to date with their current address, according to officials.

The website navientagsettlement.com says it will post updates on the timing for the notice postcards.

Who is eligible for the $260 restitution payment?

Generally, borrowers need to have lived in a state participating in the settlement as of January 2017 and spent at least two years in forbearance to qualify for restitution.

At least one federal loan needs to have been eligible for income-driven repayment and the borrower can not have enrolled in income-driven repayment prior to entering forbearance.

In Delaware, 1,528 borrowers will receive restitution payments.

Who is eligible for debt cancelation?

According to officials from the participating states, debt relief will primarily go to borrowers who had subprime student loans through Sallie Mae between 2002 and 2014 (before the company spun off Navient) and had more than seven consecutive months of delinquent payments prior to June 30, 2021.

Borrowers who had non-subprime loans to attend certain for-profit schools will also have debt canceled. A list of these schools can be found at bit.ly/320e5aG.

In Delaware, 145 borrowers will have debt canceled. The average debt being canceled is around $33,000.

How do I find out if my debt is serviced by Navient?

Log into your studentaid.gov account, enter your account dashboard and click on “My Loan Servicers.” The most recent communication will show the entity that sends bills for your private loan payments.

You can also call the Federal Student Aid Information Center at (800) 433-3243.

When do I have to resume making payments on my federal student loans?

The student loan payment pause instituted due to the COVID-19 pandemic is scheduled to end May 1.

This article originally appeared on Delaware News Journal: Navient settlement: Thousands will have student loan debt canceled

Credits: Yahoo News https://news.yahoo.com/student-loans-forgiven-included-navient-154006418.html?soc_src=social-sh&soc_trk=ma

COVID Tax Tip 2022-08, January 13, 2022

With tax filing season is just around the corner, this is a good time for those who don’t normally file to consider the benefits of filing a 2021 tax return. Filing can help them claim a refundable tax credit or get an income tax refund.

Here are some things taxpayers should consider when deciding whether to file a tax return:

Find out the general reasons to file

In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or can be claimed as a dependent of someone else. There are other reasons when a taxpayer must file. The Interactive Tax Assistant can help someone determine if they the need to file a return.

Look at tax withheld or paid

Here are a few questions for taxpayers to ask themselves:

• Did the taxpayer’s employer withhold federal income tax from their pay?
• Did the taxpayer make estimated tax payments during the tax year?
• Did they overpay last year on their taxes and have it applied to their 2021 tax?

If the answer is yes to any of these questions, they could be due a refund. They must file a 2021 tax return to get their money.

Look into whether they can claim the earned income tax credit

A working taxpayer who earned $57,414 or less last year could receive the EITC as a tax refund. For the 2021 tax year, the tax return taxpayers file in 2022, the earned income credit ranges from $1,502 to $6,728 depending on their filing status and how many children they claim on their tax return. The law allows taxpayers to use either their 2019 income or 2021 income to calculate their EITC — taxpayers may choose whichever amount gives them a larger credit. They can check eligibility by using the EITC Assistant on IRS.gov. Taxpayers need to file a tax return to claim the EITC. By law, the IRS cannot issue refunds to taxpayers claiming EITC until mid-February.

Child tax credit or credit for other dependents

Taxpayers can claim the child tax credit if they have a qualifying child under the age of 18 and meet other qualifications. Other taxpayers may be eligible for the credit for other dependents. This includes people who have:

• Dependent children who are age 18 or older at the end of 2020
• Parents or other qualifying individuals they support

The Child-Related Tax Benefits page of IRS.gov can help people determine if they qualify for these two credits.

Education credits

There are two higher education credits that reduce the amount of tax someone owes on their tax return. One is the American opportunity tax credit and the other is the lifetime learning credit. The taxpayer, their spouse or their dependent must have been a student enrolled at least half time for one academic period to qualify. The taxpayer may qualify for one of these credits even if they don’t owe any taxes. Form 8863, Education Credits is used to claim the credit when filing the tax return.

Recovery rebate credit

Individuals who didn’t qualify for a third Economic Impact Payment or got less than the full amount, may be eligible to claim the 2021 recovery rebate credit based on their 2021 tax year information. If they’re eligible, they’ll need to file a 2021 tax return even if they don’t usually file a tax return. The credit will reduce any tax owed for 2021 or be included in the tax refund.

Credit: IRS.Gov https://www.irs.gov/newsroom/here-are-reasons-people-who-dont-normally-file-should-file-a-2021-tax-return

DETROIT (AP) — A couple of months ago, a woman paid a visit to Jeff Schrier’s used car lot in Omaha, Nebraska. She was on a tight budget, she said, and was desperate for a vehicle to commute to work.

She was shown three cars priced at her limit, roughly $7,500. Schrier said the woman was stunned.

″‘That’s what I get for $7,500? ’” he recalled her saying. The vehicles had far more age or mileage on them than she had expected for something to replace a car that had been totaled in a crash.

The woman eventually settled on a 2013 Toyota Scion with a whopping 160,000 miles on it. Schrier isn’t sure he made any profit on the deal. “We just helped her out,” he said.

As prices for used vehicles blow past any seemingly rational level, it is the kind of scenario playing out at many auto dealerships across the country. Prices have soared so high, so fast, that buyers are being increasingly priced out of the market.

Consider that the average price of a used vehicle in the United States in November, according to Edmunds.com, was $29,011 — a dizzying 39% more than just 12 months earlier. And for the first time that anyone can recall, more than half of America’s households have less income than is considered necessary to buy the average-priced used vehicle.

The days when just about anyone with a steady income could wander onto an auto lot and snag a reliable late-model car or buy their kid’s first vehicle for a few thousand dollars have essentially vanished.

“I’ve never seen anything remotely close to this — it’s craziness,” said Schrier, who has been selling autos for 35 years. “It’s quite frustrating for so many people right now.”

When the government reported that consumer inflation rocketed 6.8% in the 12 months that ended in November — the sharpest jump in nearly 40 years — the biggest factor, apart from energy, was used vehicles. And while the rate of increase is slowing, most experts say the inflated vehicle prices aren’t likely to ease for the foreseeable future.

The blame can be traced directly to the pandemic’s eruption in March of last year. Auto plants suspended production to try to slow the virus’ spread. As sales of new vehicles sank, fewer people traded in used cars and trucks. At the same time, demand for laptops and monitors from people stuck at home led semiconductor makers to shift production from autos, which depend on such chips, to consumer electronics.

When a swifter-than-expected economic rebound boosted demand for vehicles, auto plants tried to restore full production. But chip makers couldn’t respond fast enough. And rental car companies and other fleet buyers, unable to acquire new vehicles, stopped off-loading older ones, thereby compounding the shortage of used vehicles.

Bleak as the market is for used-car buyers, the computer chip shortage has also driven new-vehicle prices higher. The average new vehicle, Edmunds.com says, is edging toward $46,000.

Even so, prices of used cars are likely to edge closer to new ones. Since the pandemic started, used vehicle prices have jumped 42% — more than double the increase for new ones. Last month, the average used vehicle price was 63% of the average new vehicle cost. Before the pandemic, it was 54%.

At this point, Schrier has to tell lower-income buyers that he has very few used vehicles to sell them.

“What used to be a $5,000 car,” he said, “is now $8,000. What used to be $8,000 is now $11,000 or $12,000.”

Including taxes, fees, a 10% down payment, and an interest rate of around 7.5%, the average used vehicle now costs $520 a month, even when financed for the average of nearly six years, Edmunds calculated.

Ivan Drury, a senior manager at Edmunds, said that while he doesn’t track used vehicle prices relative to household income, he thinks November marked a record “in the worst way possible for affordability.”

Monthly payments for the average used vehicle, he noted, were $413 two years ago, $382 five years ago and $365 a decade ago. The November average payment of $500-plus for a used vehicle, Drury said, is about the average that was needed five years ago for a brand-new vehicle.

Used vehicle prices are so high that Karl Hogan of Canonsburg, Pennsylvania, near Pittsburgh, was able last month to quickly sell his 2007 Toyota Tacoma small pickup truck, with more than 170,000 miles on it. Even with the vehicle’s age and mileage, a man from Ohio forked over $6,500 for it.

Hogan didn’t have to budge from the asking price. When some would-be buyers offered him less money, he told them: “I’ve got 12 other guys behind you.”

A week before the sale, when he bought his new Tacoma, Hogan had been on the other side of the equation. The dealer wouldn’t budge from his $38,000 sticker price.

“If I didn’t take it,” Hogan said, “there were three people waiting. I couldn’t get any off, but I wanted a new truck.”

David Paris, a senior manager at J.D. Power, noted that used vehicle prices are directly tied to the cost of new ones. Though some automakers report that the computer chip supply is gradually improving, prices paid by dealers at used vehicle auctions kept rising through November, Paris said.

“We’re not seeing any softening in prices, which is extremely rare for this time of the year,” he said.

New vehicle dealers have about 1 million vehicles available nationally — scarcely one-third of the normal supply, Paris said. And the vast majority have already been sold.

Given pent-up demand from consumers, prices for new vehicles are expected to remain historically high until the supply returns to around 2 million or 2.5 million and automakers resume discounting, which could take well into 2023. Once new vehicle prices do ease, the pressure on used-vehicle prices would eventually follow.

Yet even after that, the availability of vehicles will be tight because traditional sources of used vehicles — autos turned in from leases and trade-ins or sold by rental companies — have essentially dried up.

For the past decade, cars returning from two- and three-year leases were a leading source of almost-new used vehicles. But that was when more than one-third of U.S. new vehicle sales were leases, a figure now down to 22%, said Edmunds’ Drury. Because there aren’t many new autos, people with expiring leases are often buying those cars once their leases end.

Rental companies, another key source of late-model used cars, can’t buy new ones now and are holding the ones they have. Some rental companies are even buying used vehicles. Given all those factors, Paris expects the shortage of used cars to worsen through 2024.

Among the few consumers who stand to benefit are those who want to sell a used car and don’t necessarily need to replace it. The average trade-in value in October, Paris said, was $9,000 — twice what it was a year earlier.

But for people who have no vehicles to trade in and only modest incomes, the options are few to none. J.D. Power’s Paris says that if they can afford it, buyers should consider a new vehicle. He recently managed to get a couple thousand dollars whacked off the sticker price on a new Ram pickup, though he had to travel from the Washington, D.C., area to Philadelphia to reach a willing dealer he had located by searching internet forums.

“If you look hard enough and are willing to wait and travel,” he said, “you can find deals across most brands.”

Credit AP News: https://apnews.com/article/business-lifestyle-prices-2c8831b6f2d6c3228e4ad88f55c73a0c