Connect with us

Hi, what are you looking for?

Finance

Americans Might Encounter Tax Refund Shock Next Year

Numerous U.S Taxpayers could possibly encounter a tax refund shock when they file their 2022 returns in a reason that the pandemic benefits that lawmakers had designed to financially aid Americans in such a crisis have already expired.

According to the Chief of Tax Information Officer— Mark Steber. Taxpayer families could possibly expect smaller refunds when they file their taxes by early 2023 for the current tax year. $3,200 was the average tax refund in 2022 for the 2021 tax year. Based on IRS data, that was a 14% jump from the prior year. The IRS has already sent notifications regarding possible reduced tax refunds, stating in November that taxpayers would not get an extra stimulus payment with a 2023 tax refund since there were no economic impact payments for 2022.

The current tax law also had already reverted to its smaller pre-pandemic levels such as the case in CTC which is they are reverting to its prior level of having $2,000 per child which is 5% lower compared with a pandemic credit that was high as $3,600 per child.

Steber commented that the year 2021 was a quite remarkable year especially their a lot of tax breaks, refund shocks, and increases that had already expired that happen. $2,700 is likely to be a typical tax refund for taxpayers that got in 2021 for their 2020 taxes.

He also added that it really depends on taxpayers’ situation because refunds are dependent on a number of factors ranging from an individual’s tax bracket or whether a taxpayer might have children.

IRS stated the adjustments that they are going to make in response to inflation. Also, in addition, they commented about the possible experience taxpayers might expect saying “You’re not going to have as great an experience as you did last year,” But the good news is taxpayers can still take steps to improve their tax situation before year-end.

Here are some of the tax changes that may affect your refund in 2022:

No stimulus check

The government did not issue any stimulus checks in 2022, with the American Rescue Plan Act authorizing the third and last payment in the spring of 2021. Because these checks were issued in 2021, they were recorded in tax returns submitted in early 2022 and had an impact on tax refunds issued earlier this year.

Some taxpayers used their 2021 tax filing to claim more stimulus money, resulting in larger refunds. Children born in 2021, for example, were largely excluded from the third wave of stimulus payments since the IRS was relying on 2020 tax returns to determine eligibility.

Smaller Child Tax Credit

The Child Tax Credit was increased in 2021, but in 2022, it was reduced to the pre-pandemic amount of $2,000 per child. It was set to return to its pre-pandemic amount of $2,000 per child, irrespective of age, in 2022. Parents of children under 6 will get $3,600 and parents of children aged 6 to 17 will get $3,000 each.

The reduced tax credit may have an effect on parents’ refunds. Other lawmakers and child advocates are also pushing for the reinstatement of the higher CTC amounts. However, it’s uncertain whether there will be any progress on this subject given that Congress will soon break for the holidays.

The Child and Dependent Care Credit

The Child and Dependent Care Credit, which helps parents pay for child care, was boosted under the American Rescue Plan. But that tax credit has also reverted to its pre-pandemic level. Parents can receive a credit on their 2022 taxes for up to 35% of up to $6,000 in qualifying childcare expenses.

Credit for Earned Income

The Earned Income Tax Credit, or EITC, is another tax credit that is less generous this year and is intended for low- and moderate-income employees. During the pandemic, the EITC was increased for a group of workers who typically don’t benefit much from it: Adults without kids.

The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, had a provision that allowed taxpayers to deduct an extra $300 for single taxpayers or $600 for married couples on their 2020 and 2021 taxes. But that above-the-line charitable deduction wasn’t renewed in 2022, which means that taxpayers who don’t itemize won’t get an extra deduction for their charitable gifts this year.

Click to comment

Leave a Reply

Your email address will not be published.