This Year’s Tax Refund Might Be Smaller Than Expected


In the wake of the pandemic, Congress passed a slew of tax deductions and credits to help the American populous weather this difficult, financially challenging time.

But many of these deductions and credits have since expired. Thus, when you sit down to file this year’s return, you may discover your refund check is less generous than the preceding year. Even worse, you could owe, or owe more than was due on your prior year’s return.

So, what deductions and credits can you expect to see nixed from your 2022 income tax filing?

No More Claims For Stimulus Payments

Eligible taxpayers received their third and final stimulus payments in the spring of 2021. And some of these folks claimed more stimulus cash on their 2021 filling, helping them snare a larger refund.

Smaller Child Tax Credit

In 2021, parents with children under 6 received a $3,600 credit per child, and those with children ages 6 to 17 received a $3,000 credit per child.

That generous bump, however, has expired, and the credit returns to the pre-pandemic figure of $2,000 per child, regardless of age.

All of this said, several congressional leaders, including California’s Adam Schiff, are pushing for last-minute legislation to extend CTC (Child Tax Credits). But with Congress taking its annual holiday recess in mid-December, odds are slim that the current CTC will be extended.

Smaller Child And Dependant Care Tax Credit

Hiked up to $8,000 per family under the American Rescue Plan, this credit has also returned to its pre-pandemic status.

Parents can receive a credit on their 2022 taxes, recouping up to 35% of $6,000 paid toward eligible childcare expenses for families with more than one child.

According to this equation, the maximum credit is $2,100. And parents of one child can, under the same formula, claim half that amount, maxing out their credit at $1,050.

Smaller Earned Income Tax Credit

The Earned Income Tax Credit (EITC), which is aimed at low and lower-middle-income workers, also returns to its pre-pandemic status.

This credit is typically geared toward working families. But during the pandemic, the credit was adjusted to grant eligible childless workers a credit worth up to $1,500. Meanwhile, for the 2022 tax year, that credit drops to $560 max for those qualifying taxpayers.

On a related note, EITC may actually rise for qualifying families because the percentage amounts are being adjusted for inflation.

1099-K Reporting Requirement Delayed For a Year

One piece of good news for many taxpayers, especially freelancers and those in the Gig Economy, is a delay in the implementation of new IRS reporting rules governing online payment platforms.

Under the American Rescue Act, which took effect in January of this year, any transactions through online payment platforms like PayPal and Venmo over $600 must be reported to the IRS.

But this rule has been suspended for at least a year. A delay that reinstates the prior threshold only requiring IRS reporting on payments in excess of $20,000 earned on over 200 transactions.

How Will The Expiration Of Pandemic Credits + Deductions Impact Your 2022 Tax Return?

If you took advantage of pandemic-driven tax credits and deductions and saw a larger refund, didn’t pay additional taxes, or paid less taxes on your 2021 income tax return, you’re likely to see a shift on your 2022 tax return.

Wondering how this will impact your 2022 income tax filing and what adjustments you can make before year-end to compensate? Get in touch for a  FREE consultation!


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