Tax season is officially underway, and financial and tax experts say some people filing this year could be in a for a surprise.
"I think people are going to get a smaller refund,” said Judy Strauss, who is an enrolled agent and runs Strauss Tax Services in downtown Chicago. "They don’t realize they’re going to get a smaller refund."
The federal government rolled out several tax benefits to help families struggling during the coronavirus pandemic.
“There were really big stimulus checks and there were really big child credits and advanced child credits, so people got larger refunds than they thought they were going to get," Strauss explained.
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But now Strauss said those pandemic benefits have expired.
“A lot of the things like the child credits and the child care credits are back down to where they were before the pandemic,” she 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, that’s No. 1 on the list during the pandemic in 2021," said Dan Rahill, managing director at Wintrust Wealth Management. "That increased to $3,600 for children under 6 and $3,000 for other children under 17. Now that reverts back to pre-pandemic rules, and it’s only going to be $2,000 for per child this year."
The IRS is encouraging people to file their taxes electronically and said taxpayers should receive their refund within 21 days of the date they file. That refund will most likely be lowered for many, something financial and tax experts said families should braced for next season.
"I would revisit my withholding from my employer or, if you’re self employed, my quarterly tax payments, maybe increase those," said Rahill. "As a budgeting tool, many people work into their budgets the facts that they plan on an April 15 or when they file a tax refund that would be the first thing to do if you like to budget for that sorta thing."
In a November release, the IRS said that 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. In addition, taxpayers who don’t itemize and take the standard deduction, won’t be able to deduct their charitable contributions."
The IRS said the filing deadline is April 15.
