The Internal Revenue Service has said that 2023 income tax refunds may be way smaller when compared to 2022. The IRS has in an announcement urged filers to prepare early for the upcoming income tax season. They have also urged filers to tone down their expectations for the refunds they can expect against their 2022 income tax returns.
The IRS has let on the tax refunds will be quite smaller next year and income tax filers will not receive the additional stimulus checks. The tax authorities have informed folks that they should temper their expectations according to their next income tax return.
The IRS said that the tax refunds in 2023 will be way smaller and filers will not receive any extra stimulus checks against their 2023 tax refunds as no further economic impact payments were announced by the federal administration after the third stimulus checks in March 2021. It was part of the American Rescue Plan Act signed by President Biden in March 2021 immediately after he came to power in January 2021.
As most eligible individuals and families did not directly receive their stimulus checks that year, they were eligible to claim that amount as tax refunds when they filed their tax returns in 2022. That boosted the tax refunds for millions of individuals and joint filers and the total refund amount was way higher than normal.
But with the stimulus checks and other forms of federal aid dying up totally in 2022, there is no chance of any tax refund in the returns to be filed in 2023.
The Average Tax Refund
The tax authorities have revealed that for obvious reasons the average rate of income tax refund in 2022 was way higher than in previous years. And the main reason was the American Rescue Plan Act of 2021 which included the third economic impact payment and the expanded Child Tax Credit. The two were the biggest stimulus check announced to provide relief to low and moderate-earning individuals and families during the pandemic.
They together led to a significant increase in the average tax refund that was paid out earlier this year both fully and partially as tax refunds depending on the amount given out as advance against returns.
The average return for 2022 against the 2021 income tax return was $3,176. This was a significant increase of 14% from the previous year’s tax refund of $2,910. In 2020, the average tax refund was even lower at about $2,550.
Though not all income tax filers received a tax refund, an overwhelming majority received their stimulus payment through this method. Among those who filed their 2022 income tax returns, over 65% received tax refunds from the IRS, according to agency data.
Every year millions of Americans depend on some form of stimulus checks each year. But the IRS has advised filers to be cautious about expectations in 2023 against the income tax return for 2022.
The IRS has informed tax filers that they should not rely on received federal tax refunds for 2022 in 2023 by a specific date, especially when they base their purchase on the chance of receiving such refunds.
IRS Has Cautioned That Future Tax Refunds Could Be Reviewed
The IRS has cautioned that several tax refunds could be subject to additional reviews and would take much longer to process than earlier checks. The agency has revealed that it continues to process millions of income tax returns. It informed that around 3.7 million unprocessed income tax returns were received this year and remain to be processed.
A majority of the unprocessed income tax returns contained errors which were one of the main reasons for the delay, informed officials. Poor customer service and processing delays have been some major glitches that have plagued the network this year. This was reported by the National Taxpayer Advocate, an internal watchdog of the IRS.
The Internal Revenue Service has been freed from the additional burden during the pandemic of compiling the list of millions of stimulus check benefits. A fresh rule has been enacted that will be activated this season.
The rule will have a profound effect on millions of individuals and families who rely on side hustles and use 3rd party payment gateways that income Venmo and PayPal. There are other sites like eBay, Etsy, and Facebook.
Thus, companies are at present required to send out 1099-K forms to filers who have used their platform to sell over $600 worth of services and goods. But personal payments or gifts will not come under this requirement.
Earlier the threshold to send out 1099-K forms was either $20,000 or 200 transactions. Individuals who did not face that challenge in previous years had to report their income to the IRS even if they were not required to pay any income tax.
But this information was not known to many potential filers, mostly in the individual and moderate-income groups. In several cases, such individuals and joint filers ignore instructions to file income tax returns if they do not receive any documentation.
Online Filing For First Timers Will Speed Up The Process Of Tax Refunds
But with the introduction of new documents, many more individuals and joint filers can file their income tax returns for the first time. This could lead to a lower tax refund for certain filers and if the return has errors, that could lead to more delays in processing by the IRS.
Thus to prevent the occurrence of another massive backlog in the next year, the IRS has embarked on a hiring drive. It has already hired 4,000 more customer service staffers by October and another thousand more are set to join by the end of this year.
Individuals and joint filers desirous of a speedy processing of their returns are recommended to file electronically and sign up for a direct transfer of any tax refund. This will hasten up the process and filers will receive their money way earlier than the manual method of filing.
For those who owe over $10,000 in income tax returns, Tax Relief helps them to break down their debts into installments.
Those who had their student loans forgiven might owe taxes to the state even if they have received a federal income tax waiver.
