Experts Warn New IRS Tax Rules Are a Double Whammy for Families

Some analysts believe that the Internal Revenue Service has issued several warnings regarding possible lower tax refunds for this filing season. This could be a problem for families who might have expected an expanded child credit.

Analysts sound off

Lynnette KhalfaniCox is a financial expert NPR January 22, 2012: “four main reasons” that cause will cause 2022’s returns to be smaller.

“The first is: no more stimulus checks. The second is that what was called the enhanced child credit—that’s gone,” She noted. A third reason is that a pandemic-era tax break for charitable deductions was killed for this year, she said, noting that the fourth reason is because some individuals might face Taxes Investment gains

Joe Buhrmann is a financial advisor and senior financial planning specialist at eMoney Advisor. CNBC Friday’s lower refunds and high inflation could mean that Friday is a difficult day. “double whammy” And “nasty surprise” For some people, namely for families.

Tax breaks that were implemented for 2021’s taxes have returned to prior levels, the Internal Revenue Service (IRS) has said. The maximum amount of child tax credit is $2,000 per child.

The Consumer Price Index, a key metric used to measure inflation, went up by 5 percent in December 2022, according to the Department of Labor’s latest statistics published last week. That’s down from the 5.5 percent year-over-year increase that was seen in November of last year.

“That’s money out of refunds right there,” Buhrmann made the reference to child tax breaks.

“But a whole bunch of taxpayers actually received what’s called a recovery rebate credit,” Khalfani-Cox said the same. “And they got $1,400 per person on their 2021 taxes,” You can increase your tax refund or lower your bill. “But now that’s gone,” She made a comment.

What the IRS Says

In a recent news release, the IRS said that some taxpayers should expect a smaller refund due to the expiration of pandemic-related stimulus payments and changes to child credits.

One example is the child tax credit. This benefit will disappear when parents file their 2022 tax returns. Normally, parents receive $2,000 per child. However, in 2021 the benefit will increase to $3,600 per child below 6 years old and $3,000 for children 6 years and older.

The IRS already issued notices Concerning possible smaller tax refunds, it is noted in November “taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no economic impact payments for 2022.”

According to the agency, it will be difficult to claim a deduction on a 2022 tax return for a charitable donation.

“The IRS cautions taxpayers not to rely on receiving a 2022 federal tax refund by a certain date, especially when making major purchases or paying bills,” The agency stated. “Some returns may require additional review and may take longer.”

How to get the $2,000 Child Credit

The full $2,000 child credit can be claimed by families when they file their 2022 returns. However, only up to $1,500 of the credit is refundable, Not noted TurboTax is a new release. The increased child tax credit was fully refundable under 2021’s rules.

For 2022’s tax year, a “child must have been under age 17 (i.e., 16 years old or younger) at the end of the tax year for which you claim the credit,” According to the tax company. The child must be your child, an adoptee, a stepchild or foster child.

The parent or guardian has to claim that child—who must either be a U.S. citizen or U.S. resident alien—as a dependent on the 2022 tax return. The child must have lived with the parent for more than six months, be under the age of 19 or under the age of 24 and a full-time student or disabled, and the child cannot have provided more than half of his or her own financial support during the tax year.

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