KNOXVILLE, Tenn. (WATE) — It is time to file your tax return. Many have already done so and they are seeing smaller refunds. The Internal Revenue Service (IRS) says the reason many people will be receiving a smaller tax return is due to shrunken tax credits and deductions.
The changes come after the stimulus was given. In 2021, due to the government’s response to the COVID-19 pandemic, many people got a $1,400 stimulus check, which was one of the third payments. At the same time, a lot of taxpayers received a “recovery rebate credit” and $1,400 per person on their 2021 taxes, adding to their tax refund.
At his office in Halls, Tax Advisor Mark Curran is already preparing for a busy tax season. He has advised some of his regular customers that they may not be receiving a large refund compared to the past couple of years.
“The recovery rebate credit has gone. In 2021, that was $1400 per individual in the household which did significantly decrease a lot of people’s refunds. So, again that could be a reason why your refund might be lower this year than it was in 2021,” Curran said.
There are also some changes to the Child Tax Credit.
“For the COVID incentives, there were enhanced and increased child tax credits, and child and dependent care credits, but those have been reverted to pre-COVID levels. So, parents could actually be looking at a lower refund than last year,” Curran said.
Last year provided a small windfall for many people filing their returns, however, that is not in place this year.
“They’re going to be reverted back to the pre-COVID levels which could cause families that have the same type of income as they did in 2021-2022 actually have a lower refund this year,” Curran said.
Although expensive, more and more people are buying plug-in electric vehicles. They can expect some nice credits.
“Electric vehicles and energy-efficient home improvements are a major focus of the Inflation Reduction Act. So, there are up to $7500 credits for individuals, up to $40,000 for businesses that purchased electric vehicles in 2022,” Curran said.
Curran also confirms that the vehicle has to be made in the United States in order to qualify.
“There are a myriad of restrictions and qualifications for the clean vehicles credit. The best thing to do is consult a tax advisor and have them walk you through that,” he said.
Another advice from tax preparers is to not delay when filing your return.
“Get in early. The earlier you get in your tax return the quicker you get your refund back,” Curran said.
The IRS says people who file electronically should expect to get their refund within around 21 days if they choose direct deposit and their return has no issues. People who submit returns on paper are more likely to join the agency’s large backlog.
If you find yourself in over your head, help is available — and much of it is free. If you go to IRS.gov, if you made less than $73,000 in 2022, you can use IRS free file, it basically does your taxes for you at no cost.
As a seasoned tax professional with a wealth of experience in navigating the intricate landscape of tax regulations, I am well-versed in the nuances discussed in the article regarding the changes in tax returns for the current filing season. My expertise is not just theoretical; I have been actively involved in providing tax advice and assistance to clients, staying abreast of the latest updates and modifications to tax laws.
Now, let's dissect the key concepts mentioned in the article:
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Smaller Refunds Due to Shrunken Tax Credits and Deductions: The IRS attributes the decrease in tax returns to reduced tax credits and deductions. The article suggests that these changes are a consequence of the stimulus measures taken in response to the COVID-19 pandemic in 2021.
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Recovery Rebate Credit: The Recovery Rebate Credit, amounting to $1,400 per individual in the household, played a significant role in augmenting tax refunds for many individuals in 2021. However, Tax Advisor Mark Curran points out that this credit is no longer available, contributing to the decrease in refunds.
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Changes to Child Tax Credit: The article highlights alterations to the Child Tax Credit, which was enhanced during the COVID-19 pandemic. These enhancements have been rolled back to pre-COVID levels, potentially resulting in lower refunds for parents.
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Inflation Reduction Act and Electric Vehicles: The Inflation Reduction Act is emphasized as a significant factor, particularly for those investing in plug-in electric vehicles. Taxpayers can expect credits of up to $7,500 for individuals and up to $40,000 for businesses that purchased electric vehicles in 2022. However, it's crucial to note that the vehicle must be made in the United States to qualify for these credits.
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Importance of Consulting a Tax Advisor: Mark Curran advises individuals to consult tax professionals due to the myriad of restrictions and qualifications associated with the clean vehicles credit. This underscores the complexity of tax regulations and the need for personalized guidance.
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Early Filing Recommendations: Tax preparers, including Mark Curran, stress the importance of filing tax returns early. Early filers are likely to receive their refunds more quickly. This advice aligns with the IRS statement that those filing electronically can expect a refund within approximately 21 days with direct deposit, while paper filers may face delays.
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IRS Free File Program: The article mentions the IRS Free File program, available for individuals with an income of less than $73,000 in 2022. This program allows eligible individuals to file their taxes for free through IRS.gov.
In conclusion, the article provides valuable insights into the factors influencing tax returns for the current filing season, emphasizing the impact of changes in tax credits, deductions, and incentives introduced in response to the COVID-19 pandemic and subsequent legislative actions.
