Stimulus Check 2023 Might Affect Your Tax Refunds!

stimulus check
stimulus check

The Internal Revenue Service (IRS) has issued a warning to taxpayers that they could see a much lower income tax refund this year due to the stimulus check distribution. With the expiration of many pandemic benefits, millions of U.S. taxpayers could be in for an unpleasant surprise when they file their 2023 taxes.

Stimulus Check Curbed Tax Benefits

The average tax refund in 2022 (for the 2021 tax year) was almost $3,200, according to IRS data. That’s a 14% jump from the prior year. However, with the expiration of many pandemic benefits that boosted refunds, the typical tax refund this year could be around $2,700, or roughly what taxpayers got in 2021 (for their 2020 taxes).

One of the tax benefits that has lapsed is the expanded Child Tax Credit (CTC), which is credited with lifting millions of children out of poverty. The CTC is reverting to its prior level of $2,000 per child, compared with a pandemic credit that was as high as $3,600 per kid.

The government did not issue any stimulus checks in 2022 either, with the third and final payment authorized in the spring of 2021 through the American Rescue Plan Act. Because these checks were paid in 2021, they were reflected in tax returns filed in early 2022 and affected tax refunds received earlier this year.

The IRS is also warning taxpayers that they shouldn’t bank on getting their refunds “by a certain date, especially when making major purchases or paying bills.” It added, “Some returns may require additional review and may take longer.”

Taxpayers should also be aware that the Child and Dependent Care Credit, which helps parents pay for child care, has reverted to its pre-pandemic level. Under the current law, parents can receive a credit on their 2022 taxes for up to 35% of up to $6,000 in qualifying child care expenses for two or more children.

Lastly, the Earned Income Tax Credit, or EITC, is also less generous for 2022 tax filers. This year, the tax credit reverted to its pre-pandemic level of $2,000 per child, regardless of age. Low-income parents who qualify for the EITC will receive slightly higher amounts in 2022, as that figure is adjusted annually for inflation.

In order to get the most out of the tax season, taxpayers should be aware of the changes to the tax code, stimulus check situation and plan accordingly.