If you have been getting the same refund on your tax return every year for many years, this year may be a major disappointment for you.
Tax refunds will be smaller this year for millions of Americans. It’s sad but true. We have to return to the Covid pandemic in 2021 when the federal government gave out stimulus checks. While Americans were getting $1,500 per household member, Congress was working behind the scenes to rewrite the US Tax Code and eliminate many deductions.
But, as with everything else tax-related, it can be complicated. Let’s look at several reasons why your tax refund check may be smaller this year.
- The American Rescue Plan passed at the start of the pandemic in March 2021, gave some financial relief to millions of families. It increased the 2021 child tax credit from $2,000 to $3,000 per child, 17 years old and younger. It also added $600 for children under six years old. Because of this, many Americans will not like the smaller check they receive this year. These child tax credits may reduce an individual’s refund. They may have received too much of an advance credit and do not qualify when filing their tax return making their refund much smaller than in 2021.
- Unemployment assistance. In 2020, the federal government waived federal taxes on all unemployment income. For the 2021 tax year, however, that is no longer the case. Unemployment assistance during 2021 is categorized as taxable income. Millions of Americans were still collecting unemployment benefits into 2022. Because of this benefit, many will see lower refunds this year. When someone receives unemployment assistance, they can have their taxes withheld. Many millions of recipients did not have any money withheld; thus, they have to pay those taxes back making their tax refund much smaller. To claim unemployment income on a tax return, they would have received a 1099-G form from the state or District unemployment agency. This form has instructions on how to complete this form.
- Student loan debt. As the pandemic lockdown went into effect, the U.S. Department of Education froze public student loan payments and temporarily stopped interest from accruing on student loans. It may have helped many students struggling to pay their loans. However, the $2,500 above-the-line deduction was worthless during the freeze. That means that now they have more taxable income, so their tax refund (if any) will be much lower.
So, when filing your 2022 tax returns this year, your deductions may be complicated and potentially incorrect, meaning you may pay even more or less than you should. We would advise that you hire a professional tax advisor or accountant for your tax preparation so that you can maximize your refund. You may also consult the IRS website for more information on a tax refund schedule. ***
A.K. Burton, PC, has been working with the IRS for our clients for many years. Our firm has experienced accountants who can help you file your tax returns and represent you to the IRS. We do individual and business tax returns. Call us at (301) 365-1974 for a consultation.
We serve the Bethesda, Rockville, and Montgomery County, MD area.
*** Visit the IRS website for more information about tax refunds.