Smaller Refunds in 2023

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 charitable contributions deduction line has been removed from the Form 1040.

The IRS cautions taxpayers not to rely on receiving a 2022 federal tax refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and may take longer. For example, the IRS and its partners in the tax industry, continue to strengthen security reviews to protect against identity theft.

Additionally, refunds for people claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) can’t be processed before mid-February. The law requires the IRS to hold the entire refund – not just the portion associated with EITC or ACTC. This law helps ensure taxpayers receive the refund they are due by giving the IRS time to detect and prevent fraud. So, do not expect refunds with these credits until the beginning of March.

Credit amounts also change each year like the Child Tax Credit (CTC), Earned Income Tax Credit (EITC) and Dependent Care Credit. Some taxpayers may qualify this year for the expanded eligibility for the Premium Tax Credit, while others may qualify for a Clean Vehicle Credit through the Inflation Reduction Act of 2022.

Some tax credits return to 2019 levels.

This means that affected taxpayers will likely receive a significantly smaller refund compared with the previous tax year. Changes include amounts for the Child Tax Credit (CTC), Earned Income Tax Credit (EITC) and Child and Dependent Care Credit.

Those who got $3,600 per dependent in 2021 for the CTC will, if eligible, get $2,000 for the 2022 tax year.

For the EITC, eligible taxpayers with no children who received roughly $1,500 in 2021 will now get $500 in 2022. The Child and Dependent Care Credit returns to a maximum of $2,100 in 2022 instead of $8,000 in 2021.