This year, January 23 marked the start of the federal tax season as the IRS began accepting and processing the income tax returns for 2022. Income tax refunds in one particular area of concern for many Americans, especially in the low and moderate-income categories.
The IRS has finally withdrawn its advisory to residents of states that have received inflation relief stimulus checks. For close to three weeks, residents were faced with the unprecedented request to put off filing their returns till the IRS decided on the tax status of the inflation payments.
The agency has finally decided that in most cases such inflation relief stimulus checks will not be considered taxable income. Residents thus do not have to include such payments under their income while filing their federal income tax returns for 2022.
On the issue of federal stimulus checks in 2023, it seems unlikely that any further stimulus payments or economic impact payments will hit bank accounts or drop into the mailbox in March, or any time at least in 2023.
For another federal stimulus check to happen in 2023, Congress would have to pass a law authorizing more stimulus payments. Although millions of low and moderate-earning Americans continue to struggle with the after-effects of inflation, an increase in spending power would in some ways alleviate the pressure of inflation.
If people have more to spend on consumer goods, demand would keep increasing. With supply chain issues still not straightened out following the pandemic, this would drive up prices while also leading to shortages.
Though the concept of sending out extra money to offset inflation may seem logical, the consequences would be just the reverse and could further fuel inflation. Though the stimulus checks were not the sole cause of inflation, it was a contributing factor.
Federal Tax Refunds Go Out In Full Flow
With no federal stimulus checks in 2022, the state stimulus checks sent out by around 2 dozen states continue to be the focus of attention. The IRS was undecided for more than 2 weeks after the start of the tax season on the status of such payments. It has finally decided that the state stimulus checks and tax rebates would not be subject to federal income tax in most cases.
In 2022, the average tax refund amount was $3,253 for the 2021 income tax return filed in 2022. By February 3 this year, the average refund has slid drastically to $1,963. Where there is still time to watch how the average refund size shapes up in the end, it is apparent that the average refund size will not be much more than the present average and will be way less than the refunds given out last year.
There is also the question of how much filers have to wait to get their tax refunds in 2023.
Timing The Filing Of The Returns In 2023 For Tax Refunds
Most importantly, the IRS normally urges all taxpayers to file their income tax returns as soon as possible. In this way, they get sufficient time to amend mistakes or avoid last-minute glitches in the system before the deadline sets in on April 18, 2023.
The IRS initially also urged filers to be cautious if they are residents of states that sent out inflation relief payments. It urged filers to hold off filing if they received any form of stimulus check or tax rebate from their state that was linked to inflation payments in 2022.
The list of states that sent out stimulus checks includes Colorado, California, Florida, New Jersey, Alaska, Georgia, Delaware, Hawaii, Idaho, Indiana, Illinois, Maine, Massachusetts, New Mexico, Minnesota, Rhode Island, Virginia, and South Carolina.
The IRS suggested that such filers hold off filing their federal returns if they have received payments from their state. The agency was still in the process of determining further guidance on navigating the relief. The goal was to prevent having such taxpayers file amended income tax returns.
The agency also reminded filers to ensure all of their personal information and other income tax documents are to insure a hassle-free filing process. Taxpayers may encounter delays and receive inaccurate tax refund stimulus checks if there are calculation errors in filing their returns. By filing early, you would also be able to avoid last-minute hassles when filing your paperwork.
If you are not sure about the rules and processes, you can always receive live assistance or have a tax professional file your taxes on your behalf. This will decrease the likelihood of errors delaying the refund stimulus check or making mistakes in calculating the actual amount.
Things To Consider Before Filing Returns To Get Early Tax Refunds
People tend to contact the IRS only when they file their income tax returns. Many Americans have signed up to file their returns for the first time. A substantial portion of them is first-time returns as many people did not have to file their returns and only have done so as it is linked to some income tax refunds.
For millions, filing income tax returns are linked to a tax refund payment. And this is eagerly awaited by millions of low and moderate-income families and individuals. These groups depend much on the tax refund amount to see them through the post-holiday season weeks, which is the first quarter of the year.
But millions of Americans who should have claimed certain tax credits and are due to receive tax refunds will have to wait longer this year for the federal income tax refunds.
One of the reasons was the delay in filing income tax returns by residents of states that received inflation relief stimulus checks. this was due to the unprecedented advisory given out by the IRS to put off filing returns till the agency sorted out the issue of the treatment of such stimulus checks for the purpose of returns.
The IRS finally ruled in the second week of February this year that most of the inflation relief stimulus checks would not be taxed. Most low and moderate-income families file their returns early and use the tax refund checks to spend on necessities and pay down debt. That has been delayed this year by several weeks.
