You may not be getting as big of a tax refund this year. Here’s why
If you’re banking on your tax refund to pay for a vacation or simply help make ends meet, you may need to prepare for a smaller amount this year.
NBC News senior business analyst Stephanie Ruhle outlined on TODAY what you can expect this tax season, including changes from last year that could impact your refund and resources to help you ahead of filing.
This year you get three extra days because the filing deadline is April 18 instead of April 15 due to a weekend and a holiday in Washington, D.C.
The IRS officially began accepting tax returns on Jan. 23, so you can file now and receive a refund in less than 21 days if you file online, according to the agency.
Here’s what to know:
Why will your refund potentially be smaller in 2023?
Parents who benefited from the expanded child tax credit last year could see smaller refunds because the credit has reverted to a lower level.
In 2021, the American Rescue Plan expanded the Child Tax Credit so a taxpayer could receive up to $3,600 per child for children under the age of six and up to $3,000 for children ages 6-17. That meant parents with two children under six could count on a $7,200 credit last year.
However, the child tax credit has now reverted to $2,000 for each child down from $3,600, according to the IRS.
While parents may not see the same size refund this year, Ruhle encouraged new parents to make sure to still seek out the child tax credit. You can go to this IRS site for more resources and assistance.
There also has been a change in charitable deductions that could lower your refund in 2023. During the pandemic, taxpayers were allowed to take up to a $600 charitable tax deduction, but that provision has been removed for those taking a standard deduction in this year’s tax filing, according to the IRS.
What changes are there on this year’s forms?
Your W-2 form from your employer, which lists how much money you made and what you had withheld last year, could look a little bit shorter this year.
Ruhle said it has no impact on how you file, it’s mainly just shorter because some of the boxes have been consolidated.
Another change to keep an eye on this year is for those who may have received any payments for goods and services last year through apps like Venmo and Cash App. It’s not for small payments like refunding your friend for buying dinner, but for any payments you received through the apps for goods or services.
There is a new policy that will tax these electronic payments, but it has been delayed for a year so it will not impact your 2022 payments unless you fall into two categories.
If you had over 200 Venmo or other app transactions last year or collected more than $20,000 through them, you may need to keep an eye out for a 1099-K form because you could owe taxes on that money. In addition to the federal government, some states may also require that you pay taxes on those funds.
How have tax brackets changed?
They went up slightly in 2022, but that’s normal from year to year.
Ruhle reminded taxpayers that the marginal rates, which we often call tax brackets, work like steps. If you and your spouse make $100,000 combined, that means your income up to the first $20,000 is taxed at 12%, and then your income up to $83,000 is taxed at 22%, and so on.
No one’s income is taxed fully at one percentage. You can check IRS.gov to see if your highest marginal rate has changed this year.
Has inflation impacted taxes?
The standard deduction has gone up because of inflation, but that’s actually a good thing.
It means you’re going to get a reduced number in your taxable income. Those who have fairly simple taxes without a small business or a lot to write off can claim the standard deduction, which is the specific dollar amount that will reduce your taxable income.
The federal government is giving you an extra $400 to $800 in your standard deduction depending on whether you are single, filing jointly or the head of household.
This article was originally published on TODAY.com
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