Overview of 2023 Tax Filing Changes
The end of COVID-19-era tax breaks alters deduction filing for 2023, potentially leading to smaller refunds or larger balances due for many Americans, according to the IRS.
Pandemic-related tax credits are reverting to 2019 levels, marking a return to pre-pandemic norms.
Reversion of Key Tax Credits
The Child Tax Credit for qualifying children under 17 drops to $2,000 per dependent in 2022 from $3,600 in 2021, adjusted for income.
Taxpayers without children claiming the Earned Income Tax Credit receive $500 in 2022, reduced from $1,500 in 2021.
The Child and Dependent Care Credit maximum returns to $2,100 in 2022, down from $8,000 in 2021.
Charitable Deductions and Filing Deadline
Above-the-line charitable deductions of $300 for single filers or $600 for joint returns have not been extended into 2022, requiring taxpayers to itemize to claim them.
The main federal tax deadline for returns and payments is April 18, 2023, providing three extra days.
The biggest changes for the 2022 tax year is really a story about a return to the status quo. Pandemic era tax benefits such as the multiple rounds of stimulus payments and the expanded child tax credit have rolled off. Refunds for many people will be lower since these special provisions no longer apply.
1099-K Reporting Delay for Side Hustles
Small businesses and side hustlers expected 1099-K forms for transactions over $600 with third-party networks like PayPal and Venmo in 2022.
Previously, forms were issued only for 200+ transactions totaling at least $20,000.
The IRS delayed the new $600 reporting threshold to the 2024 tax season to reduce confusion and allow preparation time.
The IRS was set to make massive changes to the 1099-K form for this tax season, but those changes have just been delayed until the 2024 tax season. That's good news for all you small business owners because now the IRS will not have a record of the income they actually made.
Inflation Adjustments for Tax Year 2023
Inflation adjustments to tax brackets and standard deductions are higher than in recent history.
While 2022 brackets reflect some changes, the 2023 adjustments are likely to have a greater impact.
Taxpayers will see effects when filing for 2023, with potentially more favorable outcomes than 2022's less drastic shifts.
Taxpayers will likely see the effect of the federal income tax bracket adjustment next tax season when filing for the 2023 tax year. The 2023 adjustments may be more favorable for some folks than the 2022 adjustments, which were less drastic.
