What's New for the 2023 Tax Year
You may have seen news articles or news stories that warn taxpayers to expect lower tax refunds this year. The reason why most taxpayers may see lower refunds this year is that many of the post pandemic benefits detailed in the American Rescue Plan are no longer in effect or have returned to pre-pandemic levels. Below are some of the chages taxpayers will be seeing this year that will affect their refund. We are here for you to answer any questions you may have but before you call, email or text, check out the information below to find a potential answer to your question.
When dates are tax season this year?
Tax Season starts on January 29, 2024 and ends on April 15, 2024.
Section 179 Deduction Limits
Section 179 deduction enables businesses to write off the cost of qualifying property and equipment in the year they are placed in service, rather than depreciating them over time. In 2023, the Section 179 deduction limit has been raised to a $1,160,100 for property used 50% or more for business purposes. This is an increase of $80,000 from the previous year (2022). This encourages businesses to invest in capital assets and equipment while enjoying substantial tax savings.
Income tax brackets for 2023
Standard Deduction for 2023
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 (5 and under) or $3000 (6-17 years old) 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.
The Child Tax Credit is lowered back to pre-pandemic pricing
In 2021, the American Rescue Plan Act (ARPA) temporarily increased the Child Tax Credit to $3600 for kids 5 and under and $3000 for kids 6-17. But in 2022, the credit returns to $2,000 per child age 16 or younger. The credit is also subject to phase-out starting at $400,000 for joint filers and $200,000 for single filers. For other qualified dependents, you can claim a $500 credit.
Charitable Contribution changes
During the Covid pandemic, taxpayers could take up to a $600 charitable donation tax deduction on their tax returns. However, in 2022, those who take a standard deduction may not take an above-the-line deduction for charitable donations. This rule has changed back to the pre pandemic tax law regarding charitable contributions.
Reporting rules changed for Form 1099-K
Taxpayers should receive Form 1099-K, Payment Card and Third Party Network Transactions, by January 31, 2023, if they received third party payments in tax year 2022 for goods and services that exceeded $600. Prior to 2022, Form 1099-K was issued for third party networks transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000. The American Rescue Plan Act of 2021 lowered the reporting threshold for third party networks that process payments for those doing business.
Refunds
The IRS always cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and processing may take longer. For example, the IRS, along with its partners in the tax industry, continue to strengthen security reviews to help protect against identity theft and refund fraud. Just like last year, refunds for tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit, cannot be issued before mid-February. This applies to the entire refund, even the portion not associated with these credits.
How can I check on the status of my refund?
Once your tax return has been completed and e-filed, taxpayers can track their refund using the Where's My Refund? tool.
Can't find the answer to your question? Please feel free to email us at [email protected] and we will respond to you as soon as possible.