Tax Season Opens; Refunds Likely Lower
Tax season opens on January 23rd and to prepare, the IRS has a warning: DO NOT expect refunds to be quite so generous this year. The average tax refund for the 2022 filing season (through the end of October) was $3,176, a 13.8 percent jump from the prior year average refund of $2,791 and a sizable increase from the pre-pandemic year of 2019, which was $2,869.
The reason for the early warning is that many of the COVID-19 relief measures stopped last year. There were no Federal or state stimulus recovery rebates or credits; no enhanced child or dependent care tax credits; and no charitable deductions for standard filers. As these emergency programs go away, you will likely find that much of your tax preparation for tax year 2022 will look a lot like your prep for tax year 2019.
That said, there are still some pandemic-era issues that the IRS needs to address. According to the Taxpayer Advocate’s 2022 Annual Report to Congress, taxpayers and tax professionals “experienced more misery in 2022” due to paper processing delays and poor customer service. But the report also says the IRS made considerable progress in reducing the volume of unprocessed tax returns and correspondence and is poised to start the 2023 filing season in a stronger position, after greatly reducing backlogs of paper returns and starting to increase staffing.
The opening of tax season is a good reminder of some basic facts:
Tax Filing Deadline: April 18, due to observance of Emancipation Day in the District of Columbia. April 18 is also the due date to file for an extension, which gives you until October 17.
IRS Free File: Open to taxpayers with Adjusted Gross Income (AGI) of $73,000 or less in 2022. Free File lets you file your federal taxes at no extra cost either through electronic fillable forms or through IRS partnerships with private tax preparation services.
Avoid Delays, File Electronically: Paper = Problems. File electronically and use direct deposit and you will avoid the headache of a delay. If you are due a refund, then you will likely receive it within 21 days of filing electronically.
Don’t Call the IRS. The IRS received 173 million calls during FY 2022. Only 22 million (13 percent, or roughly one out of eight calls) got through to an IRS employee. As a result, most callers could not get answers to their tax-law questions, receive help with their account problems, or speak with an employee about compliance notices. Those who got through waited an average of 29 minutes on hold before the call began.
Stand Down on Digital Payments: 2023 was supposed to be the year that those who earned money on platforms like Venmo and PayPal would have to report transactions over $600, regardless of the number of transactions, to the IRS. After lots of complaints, the agency hit the pause button and announced that the new rule will NOT be in effect this season. The IRS also noted that the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect.