Actions to Take Now to Help Enlarge Your Refund and Trim Debt in Upcoming Tax Season

With 2023 almost here, you may do well to start preparing now to file your 2022 federal tax returns.

One downside, according to experts, is that tax refunds next year will come in smaller amounts, as several tax breaks tied to the COVID-19 pandemic expired in late 2021. However, the good news is there are steps you can take to help boost your refund, as well as trim your tax debt, before the year ends.

Getting a refund is still a big deal for many reasons. For instance, it can help pay off high-interest rate credit cards, boost or rebuild an emergency fund, and erase Christmas debt, among other benefits.

Based on a report, the average tax refund was $3,039 this year, up from $2,827 in 2021. Reflecting on taxes, “2022 is the year of the great reset,” Mark Steber, chief tax information officer for Jackson Hewitt told CNET. “A lot of things that were put into place for 2021, and some part 2020, will revert back to pre-pandemic years, which can lead to refund shock or, more importantly, balance-due shock.” While it is unknown what the amount will be, the changes could affect the size of tax refunds next year.

“The news for this tax season surrounds the tax credits and deductions that were not extended into 2022,” Mark Jaeger, vice president of tax development at TaxAct, said via The Ascent. The bottom line is, you may still get relief from tax breaks, but in lower amounts.

According to the IRS, some tax credits have reset to the levels from 2019. As such, the IRS reported the amount per dependent for those eligible for the Child Tax Credit will be $2,000 for the 2022 tax year, versus $3,600 in 2021. Qualified taxpayers with no children who got around $1,500 in 2021 for the Earned Income Tax Credit will get $500 in 2022. The Child and Dependent Care Credit reverts to a maximum of $2,100 in 2022, rather than $8,000 in 2021. You can get more information here.

Tax returns for 2022 are not due until April 18, 2023, and the earliest you can file is late January. Still, there are actions that can be taken now to help bring savings when tax season arrives. Check out this site and another here to get more helpful tips.