Taxpayers filing their 2022 taxes could be in for a ‘refund shock’
Asher Notheis
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While many are getting ready to begin filing their 2022 taxes at the start of the New Year, it is likely that the refund they receive this year will not be as big as the refund they received last year.
Some benefits that were enacted in response to the pandemic have expired since the last tax year, while others that still exist have reverted back to their pre-pandemic levels. The average tax refund taxpayers received for their 2021 taxes was a little less than $3,200, a 14% jump from the prior year, according to IRS data. However, the next refunds are likely to be around $2,700, approximately what taxpayers received for their 2020 taxes, according to CBS News.
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The previous tax year “was quite a remarkable year with the insertion of all those new tax breaks,” explained Mark Steber, the chief tax information officer at Jackson Hewitt. “But jump ahead to this year, and a lot of the increases expired, hence the term ‘refund shock’ or ‘refund surprise.'”
The child tax credit is one benefit that is shrinking for the 2022 tax year, reverting back to the $2,000 parents received for each of their children. In the 2021 tax year, the benefit increased to parents getting $3,600 for every child under 6 and $3,000 for every child between the ages 6 and 17.
The earned income tax credit will also be decreased in the next tax year as low-income workers with no children will be receiving $560 in the 2022 tax year. These workers had previously been eligible to receive a credit worth up to $1,500 in the last tax year.
The rule of thumb Steber advises is to not take one’s 2022 tax refund and expect it to be as good as their 2021 refund because “you’re probably going to have not as pleasant an experience as you had last year,” he said.
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Ahead of filing taxes next year, Steber recommends putting money away into a traditional IRA or 401(k) account because money invested into these funds lowers a person’s taxable income. Another way to lower one’s taxable income is to sell off positions that cause investment losses this tax year because people can deduct up to $3,000 in losses against their earnings.