IRS ends COVID-19 tax credits: Here's what you need to know before filing in 2023
Pandemic-era tax credits are resetting to normal levels and it could mean a smaller refund for many Americans, experts say. (iStock)
Among the several pandemic tax credits returning to 2019 levels is the Child Tax Credit (CTC). Filers that qualified for a $3,600 per dependent in 2021 will get a credit of $2,000 in 2022 for each qualifying child under age 17, or less, depending on their income.
Taxpayers with no children who claim the Earned Income Tax Credit will get $500 in 2022, revised from $1500 in 2021. The Child and Dependent Care Credit will return to a maximum of $2,100 in 2022 instead of $8,000 in 2021.
Taxpayers should also be aware that above-the-line charitable deductions, which were $300 per single taxpayer or $600 per joint return, have not been extended in 2022. Tax filers will have to itemize to claim those deductions this year.
Additionally, filers will get three extra days this year to file a return, or tax extension as the main tax deadline for all federal tax returns and payments filing is scheduled for April 18, 2023.
"The biggest changes for the 2022 tax year is really a story about a return to the status quo," Eric Bronnenkant, the head of tax at Betterment, said. "Pandemic era tax benefits such as the multiple rounds of stimulus payments and the expanded child tax credit have rolled off."
"Refunds for many people will be lower since these special provisions no longer apply," Bronnenkant continued.
If you think you will receive a smaller refund this tax season but have debt you need to pay down, you could consider consolidating it with a personal loan. You can visit Credible to find your personalized interest rate without affecting your credit score.
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IRS delays side hustle income reporting change
Small businesses and people with side hustles were expecting to receive a form 1099K that shows their income and the number of transactions of more than $600 made with third-party settlement organizations (TPSOs) like PayPal and Venmo in 2022.
Before 2022, the form was only provided if a business made 200 or more third-party network transactions and the total value of those transactions was at least $20,000.
However, the IRS announced in December that it would delay the new reporting standard "to help reduce confusion during the upcoming 2023 tax filing season and provide more time for taxpayers to prepare and understand the new reporting requirements."
"The IRS was set to make massive changes to the 1099-K form for this tax season, but those changes have just been delayed until the 2024 tax season," Karla Dennis, the founder of Karla Dennis & Associates, said. "That's good news for all you small business owners because now the IRS will not have a record of the income they actually made."
If you are looking to reduce your expenses amid economic uncertainty, you could consider using a personal loan to pay down debt at a lower interest rate, saving you money each month. You can visit Credible to find your personalized rate without affecting your credit score.
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Inflation Brackets Adjusted for 2023
Inflation adjustments to items such as tax brackets and standard deductions are higher than in recent history.
The IRS makes these adjustments every year. While the 2022 federal tax brackets have reflected changes; it's the 2023 changes that are likely to make more of a difference, according to Armine Alajian, a CPA and the founder of the Alajian Group.
"Taxpayers will likely see the effect of the federal income tax bracket adjustment next tax season when filing for the 2023 tax year," Alajian said. "The 2023 adjustments may be more favorable for some folks than the 2022 adjustments, which were less drastic."
Here's how inflation will impact standard deductions in 2023, which all tax filers can claim unless they choose to itemize their deductions:
- For married couples, the standard deduction will increase to $27,700, up $1,800 from 2022.
- For single taxpayers and married individuals filing separately, the standard deduction will increase to $13,850, up $900 from 2022.
- For heads of households, the standard deduction will be $20,800, up $1,400 from 2022.
If you're interested in borrowing a personal loan to help you pay off debt at a lower interest rate, you can visit Credible to compare personal loan lenders and find the right option for you.
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