While the income Tax Refund season is a period of stress and dread for most taxpayers, for low and moderate-income families, it could mean the arrival of the biggest check of the year. And if you want a bigger tax refund, you will have to ensure that you include all the dependents in your family. And that includes your partner.
If you want a big tax refund in the 2023 filing season or to minimize your tax liability you would have to take advantage of every possible Tax Refund break. Especially as the average tax refund this year has gone down in the absence of the federal stimulus check and the Child Tax Credit stimulus check in 2022.
It is possible to file Tax Refunds on your own taking the help of various free pieces of software. But it is advisable to find a financial advisor as they can help you maximize your tax refunds or cut down on your liability.
For the tax year 2022, the Tax Refunds of which are being filed in the first quarter of 2023, some of the tax credits that were expanded in 2021 have returned to the pre-pandemic levels. This means that the affected tax filers will in all likelihood receive a lesser amount as a tax refund compared to the previous two years.
The affected scheme includes the enhanced version of the Child Tax, which was increased from $2,000 for each dependent to up to $3,600, depending on the age of the child. The annual CTC payment came to almost $8,000 per family if the filing was done rightly. There is also the Earned Income Tax Credit and the Child and Dependent Care Credit.
For families that received $600 per dependent in 2021 for the child tax credit, this has adversely affected the tax refund amount in 2023.
The EITC amount has also been similarly affected in 2023. Eligible taxpayers with no children who received in the region of around $1,500 in 2021 now stand to gain $530 in 2022.
The Child and Dependent Care Credit tax refund amount have also been similarly affected. Filers will not get a maximum of $2,100 for the 2022 tax year instead of $8,000 in 2021.
Filing Our Income Tax Refunds For Free Could Maximize Your Tax Refund Amount
Over a hundred million taxpayers are eligible t file their income tax return for free. This could help them keep all their refund amount or cut back on their taxes. There are three options that could maximize your benefits when it comes to your tax amount.
The IRS Volunteer Income Tax Assistance (VITA), the Tax Counseling for the Elderly (TCE), and the AARP Foundation Tax-Aide have been around for fifty years. These three services use qualified tax preparers and have high-quality standards. They also offer free tax help to filers who are in need of assistance in preparing their income Tax Refunds.
The assistance is generally for filers who have an Adjusted Gross Income of $60,000 or less. Filers with disabilities, those above sixty years, and people with limited knowledge of English can avail of this assistance.
Defining A Dependent For Income Tax Filing Purposes
In simple terms for income tax purposes, a defendant is defined as someone other than the spouse or the taxpayer. They should qualify to be claimed by someone who is filing an income tax return.
Put into simple words, a dependent is one who relies on others for financial support. Such support includes food, housing, clothing, necessities, and much more.
It can also include people who are not directly related to the tax filer or filers. This category includes a domestic partner. Once you decide that someone is your dependent for the purpose of your income tax return, you should notify the IRS of your intention and inform them that the potential dependent meets the requirements that qualify them to be calmed as dependents.
For income tax years before 2018, filers could decrease their income tax liability by a certain amount for each of the declared dependents. They have to be claimed on your annual income tax return, both federal and state. This deduction is known as an exemption deduction. In the 2017 income tax year, this deduction came to $4,050 for each qualifying dependent. Starting in 2018, the exception deduction was done away with.
This exemption deduction was replaced with the Other Dependent Credit or the Child Tax Credit stimulus check, which was typically a more generous change. These two were similar and dependent typically on the age of the dependent and also how they were related to the principal filer, who is claiming them as a dependent in their income tax return.
A credit is way more beneficial than a deduction. While a credit directly reduces your income tax, a deduction only reduces the amount of income that is liable to be taxed by the authorities.
How Does It Help To Claim Someone As A Dependent
For those who have a family, it is necessary to be aware of how the IRS defines dependents for the purpose of income Tax Refunds. And this knowledge could save you thousands of dollars as a taxpayer each year, or increase the amount of your tax refund.
Before the 2018 income tax year, each of the qualified dependents that were claimed reduced the income tax amount. These were later replaced by the Earned Income Tax Credit, and the Child and Dependent Care Credit for daycare expenses. For medical expenses, various itemized deductions were allowed and most tax credits involved children or family issues.
Including such dependents could mean the difference between paying income tax or receiving a tax refund check. While the basic rules are apparently simple, they can be complicated when applied to several family relations and situations.
For instance, having a son off at college or a cousin staying with you for the summer, or a child with a part-time job. All of these positions for qualifying dependents cover most of every conceivable situation. This includes housekeepers and emancipated offspring. But for the most part, the rules are simple, and the basic rules cover almost everyone in the family.
