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Your tax refund may be smaller this year; here’s why

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Chicago — The official tax filing season begins on Monday. A surprise might be waiting for your wallet.

So, whether you plan to file your 2022 federal income tax return soon or wait until the last minute, now is the time to see if you owe the IRS more money, or likely get it. This is a good time to find out if In the case of a refund, the amount.

Here’s why: Amounts may vary significantly from last year. Some common tax benefits have changed since you filed your 2021 return. Your financial situation can also change when you sell assets or get laid off.

If you find that you need to pay the IRS more money and it will take longer to put the funds together, “you can still apply, but please set the payment for April 18,” H’s chief tax officer said. Chief Cathy Pickering said.&R block. (Paying after April 18th may result in fines and interest.)

Why Some People Get Small Refunds

Most Americans receive federal tax refunds each year, and for many, those refunds are a big financial boon. CNN reported.

But that benefit is likely to be smaller this year. This is partly due to the expiry of some tax incentives that were in effect in the previous tax year.

Child Tax Credit: For the 2022 tax year, if your adjusted gross income is less than $200,000 ($400,000 if jointly filing), a parent may pay up to $2,000 for each child up to age 16. You can claim a tax credit. Beyond these levels, credits begin to phase out. And the portion of the credit that is treated as refundable (meaning it is paid without having to pay federal income tax) is limited to $1,500 for her, and at a minimum he earns $2,500. Only available to one person.

But this falls well short of the now-expiring enhanced child tax credit that was in effect in 2021. Among other things, it is fully refundable with no income requirements, Pickering noted. This enhancement also allows parents to claim credits up to $3,600 for each child under 6 and up to $3,000 for children ages 6 to 17.

Child Support Credit: The tax credit that a working parent uses to help pay child support, or the tax credit filers claim to pay for adult dependent child support, will also be significantly lower in the 2022 tax year. increase. Expired.

For example, in 2022 returns, you can claim up to 35% on expenses up to $3,000 for one person, or up to $6,000 for two or more people. This is a non-refundable credit. In other words, you can claim only if you have an offsetting federal income tax liability.

In contrast, for tax year 2021, the credit was fully refundable, worth up to 50% on expenses up to $4,000 for one person, and up to $16,000 for two or more people.

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That’s how much difference this makes, according to Pickering. This year, you can only get credit up to $1,050 if you have one child or dependent ($2,100 for him if you have two or more). In contrast, last year’s credit was $4,000 for him (or $8,000 for two or more).

Employed Income Tax Credit for Childless Persons: A refundable credit, the EITC allows low- and middle-income workers (defined as workers earning less than $59,187 in 2022), especially filers with children. It was a way to help financially. .

The EITC is available to income earners who do not qualify for children. But someone in this group has only $560 in his 2022 credit. This is about $1,000 less than his $1,502 he was allowed to claim in 2021 as a result of his one-year hardening that was part of the American Rescue Plan.

Charitable Deductions: To justify itemization of deductions for 2022, including charitable contributions, the standard deduction of $12,950 for single filers and $25,900 for joint filings if married is needed.

Most filers don’t itemize. This usually means that any charitable contributions they make during the year are included in the standard deduction and therefore not reported in earnings.

However, for the 2020 and 2021 tax years, filers will be allowed to deduct what is called a maximum of $300 ($600 if a couple files jointly) for charitable contributions in addition to the standard deduction. is ready.

However, the maximum deduction has expired.

Retirement benefits: If you were laid off last year and received a lump sum retirement benefit, the money will be taxable in 2022. So if that happens later in the year, it could hit the higher bracket for 2022 earnings. It could be a big one-time bonus.

Or, if you’re receiving unemployment benefits, make sure your state imposes a withholding tax on those payments. If not, it could mean you may have to send a check to the IRS, Pickering said.

Potential ways to increase your refund or reduce your tax liability in 2022

The 2022 tax year is over, but there may be a few things you can do now to increase the amount the IRS sends you, or reduce the amount you owe.

Check last year’s returns: Some tax benefits aren’t generous right now, but review your 2021 returns to make sure you’re claiming all the enhancements you’re entitled to. Please, says Pickering.

If you didn’t claim them, “file an amended tax return for 2021,” she suggested.

Take advantage of capital losses: If you sell your property for a profit in 2022, you will have to pay taxes on that profit. unless the loss is equal to or greater than the gain from the sale of other assets. Your losses can offset your gains by the dollar, and if you still have losses, you can apply them against his $3,000 of regular income in 2022. Excess losses beyond that may be used in future tax years.

Even if you only account for capital losses this year, you can offset your income up to $3,000 and carry the rest forward.

These loss rules also apply to crypto losses.

Donations to the IRA: You can make donations to the 2022 IRA until April 18, 2023. The annual limit for these contributions is $6,000 ($7,000 for those over 50).

If you contribute to a traditional IRA, your contributions may be tax deductible. But how much he can deduct depends on two factors: Whether you have access to an employer-provided plan at work and adjusted adjusted gross income.

To get the full deduction, neither you nor your spouse can be covered by your workplace retirement plan. Or, even if you have access to a workplace plan, you can get the full deduction if her corrected AGI is below her $68,000 (if married, she’s below $109,000).

But if you have access to a plan and your income is higher, the calculations are different. ), can be partially deducted.

However, if your income exceeds $78,000 (or $129,000), you are not eligible for the deduction.

Get the most out of your health savings account contributions: If you opened a health savings account last year and are covered by HSA-covered health insurance, you have until the April 18 tax filing deadline to: You can pay your 2022 deductible contributions.

The maximum contribution you can make is $3,650 for single insurance and $7,300 for family insurance. If she turns 55 or older by the end of December, he can donate an additional $1,000.

The-CNN-Wire & 2023 Cable News Network, Inc., a Time Warner Company. All rights reserved.

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Written by Natalia Chi

Chicago Popular; Chicago breaking news, weather and live video. Covering local politics, health, traffic and sports for Chicago, the suburbs and northwest Indiana.

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