"Why Your Tax Refund May Be Less Than Expected in 2022: Understanding Changes in Tax Benefits and IRS Adjustments"

2023-05-23 18:23:32

Throughout USAthe season of taxes It’s finally over and for many it may have brought relief as people eagerly await their tax refunds from the IRS. However, another large number of taxpayers said they were disappointed by the amount received as a refund, since it is usually less than what they expected.

Why is the tax refund less than expected?

Several factors contribute to a lower-than-expected tax refund this season. One of these is the tax benefits introduced under the American Bailout Plan that were changed or eliminated entirely for tax year 2022. This means that many tax credits have been reversed or disappeared, including the Child Tax Credit, the Child and Dependent Tax Credit and the Earned Income Tax Credit.

Learn what tax benefits and IRS adjustments have changed

Many tax benefits have now been reverted to pre-registration provisions. American Rescue Plan or have been removed, leading to noticeable reductions in refund amounts.

These are the benefits that have changed:

Child Tax Credit: the maximum credit amount decreased from up to $3,600 in tax year 2021 to up to $2,000.
Child and Dependent Care Credit: the amount of the credit decreased from up to $8,000 for two or more children (up to $4,000 for one child) in tax year 2021 to up to $2,100 for two or more children ($1,050 for one child).
Earned Income Tax Credit (EITC) without children: the EITC was extended in tax year 2021 to include taxpayers without children, and age limits were removed. However, for the 2022 tax year, the age limits have been reinstated, meaning people under 25 or over 65 may no longer qualify.
Recovery Rebate Credit: tax year 2021 was the last year to claim the recovery rebate credit for those eligible who did not receive the third stimulus payment sent in 2021.
Self-Employed Sick and Family Leave Credits: The American Rescue Plan has extended refundable sick leave and family leave tax credits through tax year 2021 for eligible self-employed workers and small business owners. However, these credits expired after the 2021 tax year.
Charitable cash donations: COVID Relief let people deduct up to $300 in cash donations ($600 for married couples filing jointly) on their 2021 taxes if they claimed the standard deduction. However, this deduction is no longer available if the standard deduction is claimed.