The changes in Internal Revenue Service (IRS) in 2023 are expected to increase paychecks and reduce taxes. The IRS has made these changes due to the rising inflation this 2023.
The Internal Revenue Service (IRS) implemented changes such as the new income tax brackets, an increase in retirement and Flexible Spending Account (FSA) limits, and the standard deductions on taxes. These changes are now in effect and are expected to increase paychecks and reduce the income taxes of several Americans. These changes are made by IRS due to the continuous rising inflation in 2023, as reported by Tyko.
Changes Made By IRS
According to Tyko, modifying the tax brackets is something the IRS does every year. It is the IRS’s attempt to prevent inflation from forcing taxpayers into a higher income tax bracket with no increase in income. On the other hand, the standard deduction on taxes this 2023 for married couples who filed jointly was increased to $27,700. This is an increase of $1,800 from the $25,900 deduction in 2022. For single taxpayers, the standard deduction increased to $13,850. This is an increase of $900 from the $12,950 deduction in 2022.
For the retirement limits, Americans can now contribute up to $22,500 into the 401(k), 403(b), or most 457 retirement plans. This is an increase of $2,000 from the $20,500 contribution limit in 2022. On the other hand, the limit on yearly contributions to an Individual Retirement Account (IRA) increased to $6,500. This is an increase of $500 from the $6,000 in 2022. However, the contribution limit for individuals who are 50 and older would not be affected by the annual cost‑of‑living adjustment (COLA) and will remain at $1,000. The IRS also announced last October that the limit for FSA in 2023 will be increased to $3,050. This is an increase of $200 from the $2,850 in 2022.