Tax season is officially underway, and financial and tax experts say some people filing returns this year could be in for a surprise.
“I think people are going to get a smaller refund,” said Judy Strauss, enrolled agent and director of Strauss Tax Services in downtown Chicago. “They don’t realize they’re going to get a smaller refund.”
The federal government implemented several tax benefits to help families struggling during the coronavirus pandemic.
“There were really big stimulus checks and really big child credits and advanced child credits, so people got bigger refunds than they thought they were going to get,” Strauss explained.
But now Strauss said those pandemic benefits have expired.
“A lot of the things, like child loans and child care loans, are back to where they were before the pandemic,” he said.
Financial and tax experts said families filing these claims could see a smaller refund compared to previous years. The list includes enhanced child credit, child and dependent care, earned income tax, and charitable deductions.
“The child care tax credit is No. 1 on the list during the pandemic in 2021,” said Dan Rahill, managing director of Wintrust Wealth Management. “That increased to $3,600 for children under 6 and $3,000 for other children under 17. Now that goes back to pre-pandemic rules, and it will only be $2,000 per child this year.”
The IRS encourages people to file their taxes electronically and said taxpayers should receive their refund within 21 days of the filing date. That refund will most likely be cut for many, something financial and tax experts said families should prepare for next season.
“I would review my employer withholding or, if self-employed, my quarterly tax payments, maybe increase them,” Rahill said. “As a budgeting tool, many people include in their budgets the events they plan for on April 15 or when they file a tax refund, so that would be the first thing to do if you want to budget for those kinds of things.”
In a November statement, the IRS said refunds may be smaller in 2023.
“Taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no economic impact payments for 2022. Additionally, taxpayers who do not itemize and take the standard deduction will not be able to deduct their charitable contributions. “
The IRS said the filing deadline is April 15.