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Don't Be Surprised Of A Tax Refund Shock This Year

 
 

The expiration of numerous pandemic benefits that lawmakers had created to assist Americans in the crisis could surprise millions of U.S. taxpayers when they received their 2023 tax returns.

According to Mark Steber, chief tax information officer at Jackson Hewitt, families may receive reduced refunds when they submit their taxes for the tax year 2022. According to IRS data, the average tax refund in 2022 (for the 2021 tax year) was close to $3,200, an increase of 14% from the previous year. Steber also states that several of the perks that increased refunds during the epidemic have expired, including the enlarged Child Tax Credit (CTC) and federal stimulus checks. Even the IRS is alerting taxpayers to the possibility of tighter screenings. In a news release from November, the tax authority issued a warning: "Refunds may be less in 2023." With the addition of all those tax incentives, the year 2021 "was quite a wonderful year," Steber said. Yet when we fast-forward to [2022], many of the increases had already expired, giving rise to the terms "refund shock" and "refund surprise." The average tax refund this year may be around $2,700, or roughly what filers received in 2021 (for their 2020 taxes). Of course, each taxpayer has a unique scenario, and refunds rely on a variety of things, from a person's tax bracket to whether or not they have children. A few suggestion while filing your tax return this year are for taxpayers to be cautions to not place a deadline on when they expect to receive their refunds, "particularly when making significant purchases or paying obligations." The IRS stated that the filing date will be April 18. This will give taxpayers an additional three days past the usual April 15 deadline to file. This is because April 15 is on a Saturday and Emancipation Day in the District of Columbia is on Monday, April 17.

 

Here Are Some of the Tax Changes That Could Impact Your Refund This Year:


No Stimulus Check The American Rescue Plan Act, which enabled the third and final payment in the spring of 2021, prevented the government from issuing any stimulus checks in 2022.


Due to the fact that these checks were issued in 2021, they had an impact on tax refunds that were issued earlier this year and were reflected in early 2022 tax returns. Several individuals used their 2021 tax return to claim more stimulus funding, which enabled them to receive larger refunds. Children born in 2021, for example, were typically excluded from the third stimulus check round because the IRS was using 2020 tax returns to determine eligibility, and as a result, the tax agency first overlooked children born in 2021. Yet, when they filed their taxes the previous year, the parents were allowed to claim the third stimulus check for these kids.

 

A Smaller Child Tax Credit


In 2021, the Child Tax Credit was increased, giving parents of children under six $3,600, and parents of children aged six to seventeen $3,000 each.

However, that tax credit was set to return to its pre-pandemic amount of $2,000 per child, irrespective of age, in 2022. Although that is undoubtedly helpful, the reduced tax relief may have an effect on parents' refunds.

Rep. Adam Schiff, a Democrat from California, urged congressional leaders to extend the enlarged CTC in December. Other lawmakers and child groups are also asking to reinstate the larger CTC payments. It's unlikely that the benefit will be reinstated in its enlarged form, though, with Congress currently being divided and Republicans in control of the House.

 

The Child and

Dependent Care Tax Credit The American Rescue Plan increased the Child and Dependent Care Credit, which aids parents in paying for child care, to a maximum of $8,000 per household.



Nonetheless, the pre-pandemic level of that tax credit has also returned. The current law allows parents to deduct up to 35% of up to $6,000 in qualified child care expenses for two or more children off of their 2022 taxes. Thus, the maximum credit for the current year is $2,100. (For parents of a single kid, the sum is half).

 

Earned Income Tax Credit The Earned Income Tax Credit, or EITC, which benefits low- and moderate-income employees, is another tax credit that will be less favorable for 2022 tax filers. For a category of employees who generally don't profit much from the EITC: Adults without children, it was boosted during the epidemic. Low-income workers without children were qualified for a credit of up to $1,500 in 2021. For this category, the tax credit is decreasing this year and will be $560 in 2022. Due to the EITC's yearly inflation adjustment, low-income parents who qualify will actually get somewhat larger amounts in 2022. For instance, for their 2022 taxes, qualifying parents with two children can earn an EITC of $6,164 as opposed to $5,980 in 2021.

 

No Extra Deduction for Charitable Giving There was a provision in the Coronavirus Assistance, Relief and Economic Security Act, or CARES Act, that allowed taxpayers to deduct an additional $300 for single taxpayers or $600 for married couples on their taxes for 2020 and 2021.



With the help of this provision, those who took the standard deduction, which is the majority of taxpayers, were able to deduct additional amounts for charitable contributions. However, the above-the-line charitable deduction was not extended in 2022, so taxpayers who do not itemize will not be able to deduct their charitable contributions in addition to their regular tax obligations this year.

 

What to Expect for Refunds This Year


More than nine out of ten refunds are issued by the IRS in fewer than 21 days. Yet it's probable that your tax return will need additional review and take longer.


If Your Refund Isn’t What You Expected It's possible that the modifications made to your tax return are the reason your refund is less than you anticipated. They may consist of:

  • Adjustments to any amounts of the Child Tax Credit or Recovery Rebate Credit


  • Deductions from all or a portion of the refund amount for payments of past-due taxes or debts

 

How Do I Find My Refund?



The tool allows you to look up the status of your return within:

  • A day following the e-filing of a tax return for the year 2022

  • 3 or 4 days following the e-filing of a tax return for the tax years 2021 or 2020

  • At least six months after submitting a paper return

 

Direct Deposit

Join the 90% of taxpayers who use e-filing and direct deposit to receive their refunds more quickly. That has always been the safest and quickest way to get your refund, but in these unsettling times it is much more so. Also, it is simple to use. Just enter the account number and routing number after choosing it as your refund method in your tax program. or mention your desire for direct deposit to your tax preparer. Even if you're one of the few people still filing on paper, you can use direct deposit. To prevent mistakes, double check your entry.

You can find your routing and account numbers on the bottom of your checks, in your online banking software, or by getting in touch with your financial institution. Entering your bank card number is not recommended.

Your reimbursement might be credited to your prepaid debit card if you have one. There are account and routing details on a lot of reloadable prepaid cards that you might give to the IRS. To make sure your card can be used and to get the routing number and account number—which may not be the same as the card number—you would need to contact the financial institution.

Only accounts in your own name, your spouse's name, or both names if it's a joint account, or accounts that are associated with U.S. banks, should receive your refund directly. A single financial account or pre-paid debit card may not receive more than three electronic refunds. Taxpayers who go over the limit will get a paper refund and a warning from the IRS.

You can obtain your refund more quickly with direct deposit than with a paper check, whether you file electronically or on paper. Disasters and other weather-related occurrences that disrupt postal service do not cause a delay in refunds that are direct deposited.

 

Have Questions About Your Refund?

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