Tax filing has reverted to the pre-pandemic days and the filer has been relieved of the complexities of the 2020 to 2022 tax season. Filing tax returns in 2023 is shorn of all those little benefits that have paled away. And as a consequence, tax refunds could shrink significantly.
One of the most generous of the benefits was the Child Tax Credit stimulus check which in 2021 lifted children to the age of seventeen, and their families, out of homelessness, poverty, and credit defaults. But with the expanded version of the child tax credit ending after just one year, the tax refunds linked to the CTC payments are also likely to shrink significantly as a result.
The child tax credit or its expanded version under the American Rescue Plan Act of March 2021 was a huge boost for families with children. that along with the EITC (the Earned Income Tax Credit) have largely reverted to their pre-pandemic level. people who do not list their deductions have seen their charitable donations also expire.
Most of the benefits were transient and linked to the pandemic. a lot of these measures rolled off at some point as the intensity of the pandemic eased and the economic situation turned for the better. With a return to normality, the federal support measures ended, and with it the number of tax refunds.
But there continue to be many other significant changes, unusual rules, and more tax tediousness to be considered before filing federal stimulus checks. the tax date for the 2023 season has been set at April 18, though for those who file for extensions, there is still October 16, 2023.
Deduction For Mileage And Tax Refunds
There has been a rare alteration in the middle of this year. With the enormous surge in gas prices, IRS increased the amount deductible by taxpayers for gas mileage. This is expected to benefit filers who take the mileage deduction for purposes of medical expenses and business purposes. Active duty military personnel can also avail of this deduction for their moving costs.
For the last two quarters of 2022 between July and December, the business-linked mileage rate increased to reach 62.5 cents a mile. This is a huge increase from 58.5 cents for the first two quarters of 2022.
Filers also opt for calculating the actual costs of the driving cost of their vehicle rather than using the standard rates for mileage. But that would necessitate both documenting the business miles and also other linked business expenses that are directly linked to the use of the vehicles.
Filers itemizing their returns are also eligible for using the deduction for miles driven related to medical expenses. That rate comes to 22 cents for each mile for the third and fourth quarters of 2022.
Filers itemizing their returns may also use this deduction for miles driven related to medical expenses. That rate comes to 22 cents for each mile for the last two quarters of 2022. This is again a significant increase from 18 cents in the first two quarters of the year. the mileage rate for moving expenses for military members remains the same and is available even if they fail to itemize the list.
Tax Refund For One-Time Payment For State Residents
For residents across America, and mostly along the two coasts, the one-off payments given by states to combat inflation have been declared non-taxable by the IRS. But for certain residents of Massachusetts, Virginia, South Carolina, and Georgia, the amount could end up being taxable.
Close to two dozen states sent out one-off stimulus checks to eligible residents in 2022 to offset the record inflation that assailed residents from coast to coast. But there was also an amount of confusion linked with the state inflation checks and tax rebates. The IRS added to the confusion when it advised filers to wait even as the 2023 tax season got underway.
The agency was undecided on the way to treat such payments. The various heads under which such payments were given to residents further added to the confusion. It was only in the second week of February that the IRS finally opened up about the state stimulus checks. that was a full three weeks into the tax season.
The IRS deemed the stimulus checks and inflation relief payments by 16 states as being nontaxable. The IRS declared such payments either as welfare or disaster relief payments.
Such payments are generally defined as being non-taxable. States including Colorado, Connecticut, California, Florida, Hawaii, Delaware, Illinois, Indiana, Idaho, New Mexico, Oregon, New Jersey, Pennsylvania, Rhode Island, and New York. The IRS has also provided a chart when specific items are not considered taxable.
For Alaska, the dividend payments that annually go out to residents will be subject to taxes. But then the supplemental energy payments by the state will not be taxable, the IRS informed.
In the case of Massachusetts, Virginia, South Carolina, and Georgia, the situation is way more complicated. Filers who have claimed the standard deduction, constituting the overwhelming majority, have been exempted from reporting the state payments as income. But if such a report ends up itemized, the deduction will be considered taxable. But only if the payments provide extra benefits on taxes to the filer.
Taxpayers could get added benefits if they itemize their benefits for taxes received by federal tax deductions that are paid to local, tribal, and state administrations. This includes property tax, or the SALT deduction, now capped at a thousand annually.
If a filer owes $5,000 as state taxes but received a refund of $500 from the state, that would mean that the net payment to the government was $4,500. But the filer would report the full $5,000 for the SALT deduction to the federal government. That would be considered over-claiming. So the solution would be to consider the payments as income. Small businesses, and self-employed people, have come under scrutiny as the IRS plans to collect federal stimulus checks, especially through stringent monitoring of online transactions.
