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One possible reason for a lower tax refund is that child allowance and the Child and care allowance were reduced for 2022, said certified financial planner Cecil Staton, president and wealth advisor at Arch Financial Planning in Athens, Georgia.
While both tax credits were temporarily boosted by America’s 2021 bailout plan, the expanded tax breaks were not extended through this year. “The overall picture is that a lot of people will see less money in their pockets,” Staton said.
In 2021, the Child Tax Credit offered up to $3,600 per child under age 6 and up to $3,000 per child ages 6 to 17, with half available through prepayments. But for 2022, the tax break will return to the previous amount — up to $2,000 per child under 17.
The child and care allowance, which can help offset the cost of caring for children under 13 or adult dependents, has also been reduced for 2022.
In 2021, the credit increased to up to $8,000 for an eligible individual or $16,000 for two or more dependents. However, for 2022 these caps returned to $3,000 and $6,000 for one or more dependents, respectively.
If you received payments through apps like Venmo or PayPal in 2022, You may receive Form 1099-K in early 2023reporting revenue from third-party networks.
According to the IRS, the form applies to business transactions such as part-time work, side jobs or the sale of goods.
Prior to 2022, the federal Form 1099-K reporting threshold applied to taxpayers with more than 200 transactions totaling more than $20,000. However, now the threshold is just $600, and even a single transaction can trigger the form.
Austin Chau, a CFP and wealth advisor at Menlo Asset Management in Menlo Park, Calif., said personal transactions like paying bills or dinner to your roommate aren’t taxable.
Also, you only owe taxes on profits, he said. For example, if you spent $150 on concert tickets in 2022 and sold them for $200, the $50 in profit is taxable, Chau said.
While the IRS says you shouldn’t receive the 1099-K for personal transfers, experts say you can, and the error may require you to contact the issuer or make adjustments to your tax return.
Your tax refund may also be lower because it’s more difficult claim the charitable deduction in 2022.
Marguerita Cheng, CFP and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland, said if you don’t list any deductions on your return, you won’t get a charity tax break in 2022.
Congress gave charities a boost in 2021 by allowing individual donors to claim a deduction of up to $300 for cash donations or $600 for married couples submitting jointly. regardless of whether you listsaid Cheng, who is also part of CNBC Financial Advisory Board.
However, the tax break was not extended for 2022. Now you only benefit when your individual deductions, including the charitable gift tax credit, exceed the less frequent standard deduction. In 2019, almost 90% of taxpayers used the standard deduction, according to IRS.