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Your tax refund may be smaller this year
Tax season is here and there are some changes this time around.
Americans can officially start filing their individual income tax returns for 2022 on Monday.
"This filing season is the first to benefit the IRS and our nation’s tax system from multi-year funding in the Inflation Reduction Act," acting IRS Commissioner Doug O’Donnell said in a statement. "We’ve trained thousands of new employees to answer phones and help people. While much work remains after several difficult years, we expect people to experience improvements this tax season."
A copy of a IRS 1040 tax form is seen at an H&R Block office. (Photo by Joe Raedle/Getty Images)
Here's everything that taxpayers need to know:
When is the deadline to file taxes?
Most taxpayers will have until Tuesday, April 18 to submit their returns or request an extension. That's because April 15, the typical deadline, falls on a Saturday, and April 17 is the Emancipation Day holiday in Washington, where the IRS is headquartered.
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Tax filing season officially begins
Regina Gonzalez reports
How do I apply for an individual tax extension?
If you’re an individual, you can request an extension online by filling out Form 4868 using the IRS’ "Free File" tool. You need to submit the form by April or print the form and mail it to the IRS address for your state, making sure it's postmarked by April 18. Once you file the extension, you have until Oct. 16, 2023, to file your taxes.
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However, there are pros and cons to requesting an extension.
It can give filers more time to thoroughly review their return and take advantage of all the tax benefits, like various deductions and credits, that are available to them to help them reduce liability.
By pushing back the filing date, you can also avoid a failure-to-file penalty – an extra 5% per month on the unpaid amount, which can add up to 25% of the tax due. If you file for an extension, you have until Oct. 16 before the penalty starts accruing.
Experts caution that filing for an extension does not mean you can delay paying the government the taxes that are owed.
"Extension to file is not an extension to pay," Eric Bronnenkant, head of tax at online financial adviser Betterment, previously told FOX Business. "A common misconception is that you get more time to pay, and that’s not true."
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How can I get my tax refund ASAP?
The majority of taxpayers can typically expect to receive a refund from Uncle Sam. For many families, the money can be substantial: Nearly three-quarters of filers received a tax refund in 2022, with an average payment worth about $3,176 – up from about $2,800 in 2021.
In order to receive your refund within 21 days of filing, the IRS has cautioned that you must file your return electronically, ensure that it is accurate and complete and request to receive the refund via direct deposit.
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However, the tax-collecting agency warned that some returns may require "additional review" and take longer to process if their systems identify any errors; if there are mistakes on the return; or if it suspects theft or fraud.
"Filing a paper return would probably be the worst idea of all, even though the IRS has hired additional staff," Tom O'Saben, the director of tax content and government relations at the National Association of Tax Professionals, told FOX Business. "They’re still dealing with a backlog from last year. The difference would be measured in months, instead of weeks if someone were to do a paper return instead of electronic filing."
What if I am expecting to receive the child tax credit or earned income tax credit?
The IRS is warning of a pain point for early taxpayers hoping to collect the earned income tax credit, a tax break for low- to moderate-income workers, or additional child tax credit.
If you claim either tax credit, the IRS cannot issue your refund before mid-February.
The IRS has warned refunds could be smaller this year. Why?
The agency previously cautioned taxpayers to prepare for smaller refunds this year because there were no stimulus payments delivered by the federal government in 2022. In 2021, the IRS delivered a third round of stimulus payments worth up to $1,400 per person. Eligible Americans could claim unpaid funds on their tax return.
"Refunds may be smaller in 2023," the IRS said in a November news release about preparing for the upcoming tax season. "Taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no economic impact payments for 2022."
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