Tax season has arrived, and with the end of many pandemic-induced stimulus payments and tax policies, federal returns for Texans may look different, especially if you take advantage of special programs such as the child tax credit or earned income tax credit.
The Houston Chronicle spoke to local experts to find out what’s new and what tips taxpayers should know as they prepare to file for the 2022 tax year.
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When can you start filing taxes in 2023?
The Internal Revenue Service began accepting tax return filings for the 2022 tax year on Jan. 23. The filing deadline is April 18. The deadline for taxpayers who request an extension is Oct. 16.
Cristina Cave, senior manager of community relations for BakerRipley, a Houston-based organization that runs several free tax preparation centers in the Greater Houston area with the support of United Way, advises filing your taxes as early as possible to allow time to get ahold of additional documents you may need, such as renewing your Individual Taxpayer Identification Number if you don’t have a Social Security number.
What’s new this year?
Many pandemic-related policies are now expiring, making filing taxes more similar to standards set in 2019 than for 2022, according to Raymond Nguyen, program director of regional initiatives for BakerRipley.
The child tax credit and child dependent care credit both decreased, as did earned income tax credit for a taxpayer without children.
Itemized deductions on Schedule A also saw two changes this year, according to Kathy Ploch, a certified public accountant and tax expert with the Houston-based accounting firm Durio & Korpal.
The mortgage insurance premium deduction expired and can no longer be itemized on Schedule A.
Last year, taxpayers who didn’t have enough to itemize their deductions were able to take advantage of “above the line deductions” for their charitable contributions. Those charitable contributions move back to being itemized on Schedule A this year, Ploch said.
The IRS initially had plans to require taxpayers to report any payment for goods or services over $600 through a third-party payment platform like Venmo or Paypal, but later delayed that requirement to tax year 2023.
Will tax refunds be smaller in 2023?
The end of pandemic-era policies may lead to smaller refunds this year, especially for those who claimed special credits or received federal stimulus payments through their tax returns, according to the IRS.
However, some individuals and businesses might be able to take advantage of new tax credits that were passed with the Inflation Reduction Act. Some electric vehicle owners could claim up to $7,500 in federal tax credit if their vehicle meets the requirements.
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If your home has energy efficiency technology such as Energy Star certified windows, you may also qualify for an Energy Efficient Home Improvement Credit under the Inflation Reduction Act.
What is the standard deduction for 2023?
The standard deduction for taxes filed in 2023 is $25,900 for married couples filing jointly, while single taxpayers or married couples filing separately have a standard deduction of $12,950. Both have increased since last year — up $800 for married couples and $400 for individual filers — and will increase again next year, the IRS has already announced.
How long does it take to get your refund?
Most refunds are issued less than 21 calendar days from the day they’re received, according to the IRS. But taxpayers submitting via mail could wait up to four weeks or more. Refunds may also get delayed because of errors, incomplete information or potential identity theft or fraud.
Refunds also may take longer if you apply for earned income tax credit, child tax credit or an injured spouse allocation. The former two can only be issued after mid-February, while an insured spouse allocation form can take up to 14 weeks to process, according to the IRS.
Taxpayers can check the status of their refund online at www.irs.gov/refunds.
How much is the child tax credit and child dependent care credit in 2023?
For tax year 2022, the child tax credit and child dependent care credit are returning to 2019 levels, so taxpayers receiving those credits may see smaller credits, according to the Consumer Financial Protection Bureau.
Those eligible for the child tax credit will get up to $2,000 per dependent this year, versus $3,600 per dependent last year. Taxpayers receiving the child dependent care credit will get a maximum credit of $2,100 this year, reduced from $8,000 in tax year 2021.
How much is the earned income tax credit in 2023?
In 2023, the maximum earned income tax credit ranges from $560 to $6,935 for qualifying taxpayers depending on the number of qualifying children they claim, according to the IRS. Though the maximum credit increased from last year for taxpayers with qualifying children, the maximum credit for taxpayers without children is nearly two-thirds lower than last year.
What are common mistakes to make when filing taxes?
The most common mistake to make while filing taxes is forgetting to bring all the proper documents, Cave said.
Cave of BakerRipley recommends putting any paperwork remotely tax-related into a folder throughout the year and bringing it all with you when you go to file taxes to ensure there’s no chance you’re missing any documentation. While most people may only use a W-2 or a 1099, She says it’s impossible to know what you’ll need until you sit down and begin to file.
“Maybe something changed in the past tax season for you that you will now qualify for something new, or maybe there’s a change you’re not aware of,” Cave said. “If it says tax documents, just bring it.”
She also cautions taxpayers not to forget to bring a photo-issued ID and Social Security card or Individual Taxpayer Identification Number when they go to file.
It’s also important to be extremely thorough when checking all your documents, Ploch said. Misspelling names, forgetting to sign paper returns, making simple math mistakes or putting down the incorrect bank number can all lead to issues getting your return back correctly and on time.
How should I choose how to file my taxes?
There are several ways to file your taxes, from using online software to taking advantage of free programs to hiring a certified public accountant.
Some taxpayers may qualify for free tax assistance based on income. The IRS offers free guided tax preparation through Free File if you have an adjusted gross income of $73,000 or less.
United Way offers free tax help to people who make $60,000 or less annually, are disabled are elderly or speak limited English through its Volunteer Income Tax Assistance Program. United Way’s Tax Counseling for the Elderly program also offers free help to all taxpayers, particularly those 60 or older, seeking specialized help with pensions and retirement-related issues.
BakerRipley’s free tax services are also available at more than 20 locations throughout greater Houston for any families or individuals making less than $58,000 a year.
Some programs are limited in what they can process. BakerRipley, for example, cannot help with tax returns claiming income from cryptocurrency or a rental property, of for those who are claiming a loss from their business or claiming a home office.
When looking for a place to file taxes, Cave discourages people from “shopping around” too much. Getting a return estimate requires giving up your personal information, which can lead to identity theft, she said. Some places may take the information and use it to claim your tax refund for themselves, Cave said.
Another red flag is anytime a location offers special credits or has a significantly higher estimated refund than previous estimates, or refuses to estimate the cost of services until they see your estimate, she said. It may be an indication that they’re applying for tax credits or deductions for you that you don’t qualify for in order to charge you more, according to Cave.
“If it’s two plus two, it should be four anywhere you go,” she said.
What can trigger an audit?
From 2012 to 2020, the IRS has audited just 0.55 percent of individual tax returns, according to the agency. Some audits are chosen through random selection, while others may happen because someone with whom you have a business or investment relationship was audited, according to the IRS.
Another common cause of audit is if your reported income or withheld taxes doesn’t match up with what your employer reports, according to the IRS. If you make a mathematical error on your return, you may be audited, or the IRS may exercise its power to correct simple math and clerical errors without undergoing a normal audit.
Making sure you double-check your eligibility for any tax credit you apply for is important in case of being audited, Nguyen said. The earned income tax credit is one of the most often audited tax credits because of its complex requirements, he said.