Americans Face Up To Realities Of Shrinking Tax Refund: Democrat Rep. Ilhan Omar proposes new stimulus check worth $1,200

Tax Refund

Even as Americans woke up to the reality of a smaller tax refund this year, a Democrat Representative has voiced her support for two proposals. And if passed they would together benefit millions of low and moderate-income Americans. 

The average tax refund rate has sunk to a low of just under $3,000 for the 2022 financial year. That is a fall of over 10% over the tax refund of the 2022 tax year, Internal Revenue Service’s figures reveal. The slide in tax refunds and the end of most of the federal pandemic-era stimulus checks have placed many low and moderate-income families in financial trouble. 

Families that had pinned their hopes on a generous tax refund for the 2023 tax season are in for a disappointment. Both the worker and small business owners are feeling the pinch of a total lack of stimulus checks. They had hoped for the same round of healthy tax refunds this year. This money had been a game-changer and had helped families that are dependent on relief support. They have managed to move through the economic downturn caused by the pandemic.

For businesses that are seasonal and have changing expenses, that little bit of extra money was a major help, especially during these trying times. 

During the peak months of the COVID-19 pandemic, small businesses relied on government stimulus checks. Children in the families were helped through the enhanced Child Tax Credit.

The combination of the government stimulus checks and PPP loans helps families keep their businesses afloat and the monthly stimulus checks from the enhanced CTC stimulus checks help ensure that their child was well looked after. 

But the refund has steadily dropped over the year. While the refund stimulus check was worth $8,800 a couple of years ago, it dropped to $1,700 last year. But this year it has slightly increased up to $3,100 on average. 

Beneficiaries say that it has been a rude awakening. Many low and moderate-income families base their entire year’s spending on the amount of the tax rebate. For millions of families, the tax refund amount was the biggest amount that they received this year.

Over 70% of Americans are concerned about the money they will receive as a tax refund as their whole year budgeting is dependent on the stimulus check they receive every year during the tax season from the federal government. And this concern is primarily linked to the expiry of the pandemic relief stimulus checks. 

The enhanced Child Tax Credit stimulus check amount is also down from $3,600 to $2,000 per child this year for families with children. Most families have taken the tough knock squarely on the chin, and they can do nothing more than manage the amount they receive and hope it will be enough to last them through the year. The key, they say, is planning for the year ahead with what little they have. 

A Smaller Stimulus Check And Shrinking Tax Refunds

The tax refund status is linked to whether you availed of several tax breaks during the COVID-era in 2021. And if you availed of the benefits then there is a fair chance that you could end up with a bigger tax break in 2022, or be owed a smaller tax refund. 

Several changes could influence your tax refund stimulus check, and you need to keep an eye on them. 

Many people received the third economic impact payment, the third stimulus check worth $1,400 as a tax refund. Normally such payments went straight to the bank or came in through the US Postal Service. But for many the payments came in as a rebate on their 2021 income tax return. But that will not be happening this year. 

The 2021 tax year also featured the enhanced version of the Child Tax Credit. This was one of the more generous of the federal government measures to protect hurting families financially. 

The enhanced child tax credit stimulus check was worth $3,000 for children between six and eighteen. For children under six, the amount was higher at $3,600 per child. The 2022 tax year, is back to the previous rules, the rules of the pre-pandemic era. It is $2,000 for children under seventeen. So if you are planning on claiming credit for your seventeen-year-old son, you will sadly be out of luck in such a case. 

Families that claimed an income tax break on dependent and child care last year will also face a revised limit that will be seen in the stimulus checks becoming smaller. A credit for expenses including daycare that was worth $8,000 in 2021 has decreased the next year and maxes out at the pre-pandemic level of $2,100.

Deduction of charitable contributions is normally a tax adjustment that is reserved for those filers who itemize their deductions. The percentage of such filers is way too small. During the pandemic and immediately after, the rules allowed all filers to deduct up to $300 for individual filers and $600 for married couples filing jointly as charitable contributions. This applied even if they claimed the standard deduction. But this break will not be up for grabs in the 2022 tax year payable this year. 

Managing A Small Tax Refund

While a smaller tax refund is a given certainty this year, you still have time to earn a few extra credits. This can be in the form of lowering your taxable income. For those who have a health savings account, for example. You can wait till the final tax day to make your contribution and that will be deducted from your income tax for 2022. For this year individual filers can also contribute a maximum of $3,650, while joint filers can contribute $7,300.traditional IRA account holders can also play along similar lines. They can stash up to $6,000 in any one of the retirement accounts. Such accounts are funded by pre-tax dollars.