Why is my tax refund so low?
As tax filing season begins, you should know that the IRS has warned that refunds may be smaller this year.
WASHINGTON — Tax season officially begins Monday when the IRS begins accepting and processing tax returns. According to the agency, more than 168 million individual tax returns are expected.
However, as a number of key tax credits revert to pre-pandemic amounts, The IRS says taxpayers could see a lower refund this yearespecially compared to last year.
Here are some of the reasons why:
Changes to the child allowance for 2023
One of biggest changes expected is the loss of the Extended Child Tax Credit, which increased in 2021 from $2,000 to up to $3,600 per dependent.
Most families received half of their 2021 extended credit monthly and the other half once they filed their taxes.
But the pandemic-era expansion ended in 2022, and full payments will again only go to families who earned enough income to owe taxes, a policy decision that will limit benefits for the poorest households.
“It will affect families in very different ways based on household composition and income,” said Joanna Ain, associate director for policy at Prosperity Now, a national nonprofit focused on opportunities for low-income families and racial economic justice. “I think a lot of families will be disappointed this year if they don’t have access to this really important tax credit.”
The child tax credit lifted 2.9 million children out of poverty in 2021, according to US Census Bureau estimates. The agency found that expanding the program was specifically responsible for keeping 2.1 million of those 2.9 million children above the poverty line.
“Families could pay the monthly expenses, their financial stress went down. They could pay for utilities and food,” Ain said. “They could get to work more easily. These payments are by no means a substitute for work. But they made it possible for a family to pay for gas, maybe childcare, all those things that made them better at work.
Other Tax Credit Changes
The earned income tax credit and the child raising and caring credit will also be reset to 2019 standards.
The EITC, which is available to low- to middle-income families and those without children, is now $500 as opposed to the $1,500 awarded in 2021 to those who qualify. the Child and Nursing Loan returned to a maximum of $2,100, a notable difference from the maximum of $8,000 set in 2021.
Those changes to the tax credits and eligibility that slipped into America’s bailout plan were largely in response to COVID, he explained Braden Williams, Associate Professor of Accounting at the University of Texas at Austin. The expanded tax credits and stimulus checks were ways to boost economic activity after the pandemic.
“It’s a law with what’s called a sunsetting provision,” Williams said. “After a while it stops or just goes away.”
the IRS has pointed out another reason you might get a lower refund this year is because there was no stimulus payment in 2022.
Can you accept charity donations in 2022 without details?
The tax incentives for charitable donations have also been changed for 2022 tax returns.
The rules have been rolled back to pre-2021 requirements, and taxpayers can only deduct charitable contributions if they list their deductions in Schedule A, and can only claim deductions up to 60% of their adjusted gross income.
Tips for the 2023 tax season
Gather all your information before submitting it
The IRS is urging taxpayers to collect and organize 2022 tax documents, including Social Security Numbers and Individual Tax Identification Numbers.
In addition to asking taxpayers to have all the correct information before filing a tax return, the IRS encourages Americans to review tax credits such as the Earned Income Tax Credit.
With an accurate tax return, taxpayers can avoid delays or IRS filings down the line.
Free IRS file available from January 13th
that of the agency IRS-free file The program opened on Friday, January 13, and allows taxpayers who earned $73,000 or less in 2022 to file their taxes electronically for free using “branded software provided by commercial tax reporting firms.”
Free filing forms are also available for every income level, offering free electronic forms that people can fill out and submit for free.
When can I expect my tax refund?
The IRS expects that most taxpayers who choose to pay direct and have not had any problems will receive their refund within 21 days of filing their returns electronically.
Taxpayers can check the agency “Where’s my refund?” page on IRS.gov for the status of their refunds.
If you are awaiting a refund and have claimed the Earned Income Tax Credit or Supplemental Child Tax Credit, the IRS won’t issue those refunds until around February 28 or a few days earlier. the the agency explains on its website that by law they cannot issue EITC or ACTC refunds until mid-February. Most EITC or ACTC Reimbursement status on the IRS website will be available from February 18th.
https://www.kvue.com/article/news/nation-world/tax-season-2023-why-refund-might-be-lower/507-f6e8484e-f430-4415-a124-404683bbf112 Why is my tax refund so low?