Stimulus Update: Here's How Stimulus Payments Will Impact Your 2022 Tax Refund

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  • The IRS is warning that refunds may be smaller this year.
  • Credits that boosted refunds have now expired.
  • Taxpayers must once again pay attention to late-filing penalties.

This tax season will be nothing like the last.

The IRS is doing its best to get the word out: "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."

What's going on?

In an effort to help Americans weather the COVID-19 pandemic, the federal government -- with the help of the IRS -- provided a collection of credits. Now that those credits have expired, you're likely to feel the impact at tax time.

By the way, the IRS has also issued a warning about when you can expect this year's refund. If you're accustomed to receiving a refund check or direct deposit into your checking account by a particular date, you'll want to make an alternative plan this year.

For example, if you normally have a check by March 1 and plan to use that money to make a major purchase or go on vacation, there's a chance the funds won't arrive as early as usual. To strengthen security reviews and protect against identity theft, the IRS and its tax industry partners may need additional time to process your return.

To protect yourself financially, have a backup plan ready in case it takes longer to receive your refund than expected.

While you're planning for a potentially-late refund, you may also want to plan for a smaller refund than you received last year. Here's why.

The expanded Child Tax Credit has expired

Depending on the age of your child, you watched the annual Child Tax Credit boosted from $2,000 to either $3,000 or $3,600. If you opted to accept the first half of that credit between July and December 2021, you received the back half ($1,500 or $1,800) after filing your 2021 tax return.

Republican lawmakers voted against extending the expanded Child Tax Credit and the program expired in December 2021. As you estimate the amount of your refund this year, remember that, like Cinderella's pumpkin at midnight, the Child Tax Credit is back to its pre-pandemic level of $2,000 per child.

Most people have already received economic impact payments

Eligible recipients who never received an economic impact payment (stimulus check) had the opportunity to let the IRS know when they filled out their 2020 or 2021 tax return. Once the IRS determined their eligibility, they provided the funds through a refund check.

Unless you're one of the few who have yet to receive any of the three stimulus checks you are due, there's no chance there will be an extra economic impact payment on this year's refund check.

Penalties are back

People and businesses who filed certain 2019 or 2020 tax returns late caught a break from the IRS. To help taxpayers impacted by COVID-19, most of those who filed before Sept. 30, 2022 were spared penalty payments.

You can't count on that this year. If you owe money and pay your 2022 tax returns late, you'll be hit with both penalties and the interest charged on penalties until you pay the amount due.

There's no doubt that pandemic-related tax credits had to end at some point. The challenge for taxpayers this year is to remember which credits have been reduced or eliminated and plan accordingly.

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