How to prepare your taxes if you received a child tax credit

CEO and Founder of Taxfyle Richard Lavina sits down with Yahoo Finance Live to talk about the tax file service, preparing taxes if you received a child tax credit, accounting for crypto for taxes, and IRS backlogs in past years' tax returns.

Video Transcript

ALEXIS CHRISTOFOROUS: This tax season could be one for the record books, and not in a good way. The IRS has been crippled by staffing shortages, and taxpayers now face unique challenges preparing their returns. Here to help us through it all is Richard Lavina, CEO and founder of the on-demand tax filing app, Taxfyle.

Richard, good to have you here on the show. We'll talk about Taxfyle and what you do there in a little bit. But first, I want to get to some of these challenges that we, as taxpayers, have this time around, namely how to report pandemic-related stimulus payments and those child tax credits when it comes to our tax returns. What should we know? And how might they affect our returns?

RICHARD LAVINA: Yeah, thanks for having me. So the one that's affecting most individuals here in the United States would be definitely the child tax credit. So in 2021, that credit was increased from $2,000 to $3,600, right? And a lot of us, myself being a parent, opted in to get some payments advanced in 2021, right?

So when it comes time for you to file your taxes this season, and you have until April 15 to do so, you just want to make sure that either if you're doing your taxes or your CPA or assistant is doing your taxes for you, your pro, to make sure that you track all the payments that you received in 2021 if you had some of that check-- that credit advanced to you. If not, that's OK. You could claim the full $3,600 amount on your return.

And as it relates to small businesses, some-- you mentioned stimulus payments and things like that. The biggest one would be PPP. So the latest update in terms of PPP is that if you got PPP funding because you incurred some hardship during the pandemic, that seems like, for most cases, it's fully forgivable, meaning that you don't have to pay it back.

KARINA MITCHELL: And of course, tax filing day two months away now, April 18. Crypto is one of the big conundrums that a lot of people are dealing with this year because they are supposed to disclose any sort of gains. And I'm wondering how do people deal with that?

RICHARD LAVINA: Crypto's tough, because unlike other stock, a lot of people that trade crypto go from one coin to another without necessarily exchanging it to cash first, right? So unlike the stock market, if you use an app like Robinhood or something like that, it's usually you're converting dollars into the equity of the company that you're trying to buy stock in, right? But with crypto, however, whether you use Coinbase or some other exchange, you're changing from one coin to another.

And the disconnect between how the IRS treats that and regular trading is that they calculate or they want you to calculate your gains and losses as you trade from one position to the other, right? So it seems to me that as we work with a lot of people that do crypto, they think that it's only when you change back into fiat, whether that's the euro or the USD, right, or something like that. That's when you have to record it on your schedule D on your tax return.

However, it's not. It's a little more complicated than that. There's a lot of softwares that are out there that could help you keep track of all those positions changes. And we highly recommend that.

ALEXIS CHRISTOFOROUS: You know, a lot of taxpayers are also sort of trying to deal with how to submit their 2021 returns when their 2020 returns or perhaps even earlier ones haven't even been processed yet because there's such a backlog at the IRS. What should they do?

RICHARD LAVINA: Be patient. You could definitely call and get an update. That helps for sure. But it's not like there's a secret to getting an update. They are currently have, I think, like, 6 million returns that are still backlogged. Many of them are paper filings, right? So, as you know, you could either file electronically or with a paper file. Sometimes they require you to file with a paper document, as opposed to electronically if you're doing some work that you had to revise or something like that.

And if that was the case in 2021 and you still haven't received, let's say, a refund or, you know, the settlement of your position with the IRS, those are probably going to be farther back in the queue than if it was done electronically.

KARINA MITCHELL: Now, Richard, I want to ask you about your own company, Taxfyle. It's been deemed the Uber of taxes because you can file your taxes from your couch or your home. Tell me what makes you unique from different companies.

RICHARD LAVINA: Yeah, so I think tax filing-- like, there's a lot of great do-it-yourself apps out there. And if you need assistance like TurboTax Live, that's nice if that's kind of, like, your thing. If you have a slightly more, I would say, complex position, let's say you're a small business operator, you did trade crypto, we have a network of 4,500 on-demand CPAs and IRS enrolled agents that specialize in slightly more complex situations, right?

So the niche that we kind of go for would be those that, you know, mainly are spending 10 plus hours on TurboTax and maybe are getting frustrated with it and want to [INAUDIBLE]. So about six years ago, we started this company to help solve that problem.

ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Richard Lavina is CEO and founder of Taxfyle. And we know with so many people not wanting to go in to actually see their accountant to file because of COVID, this is definitely a great option. Thanks so much for being here. Karina.

KARINA MITCHELL: All right, and I'm sending my own taxes in today.