Listed below are Three necessary issues to know earlier than submitting your taxes
1. Tax refunds may be “slightly lower” this season
While this year’s tax season started with a spate of tax returns, early filings have slowed, according to Jaeger.
He believes the change in refunds is why early returns have eased off. “What we’re seeing is that refunds are going down and more people have a balance due,” he said.
The average refund as of Feb. 24 was $3,079, compared with $3,473 a year earlier — down about 11%, according to the IRS. Of course, the average may change as there are still millions of returns to come.
What we’re seeing is that refunds are going down and more people have an amount due.
Vice President of Tax Operations at TaxAct
Typically, you get a government refund if you overpay the year’s taxes or withhold more than what you owe. The IRS warned in January that refunds this year could be “slightly lower” than last year as pandemic relief that led to tax breaks in 2021 comes to an end.
In 2021, many families received a boost with the Enhanced Child Tax Credit of up to $3,600 per child and the Child and Carer Tax Credit of up to $4,000 per dependent. But among other things, these tax breaks have returned to previous levels.
“Now you’re seeing this drop because you have people who are either less confident because they might get a smaller refund,” Jaeger said. “Or they actually owe the IRS money… no one really wants to pay that balance due by April 18.”
2. Avoid refund delays with a complete and correct return
One of the best ways to avoid delays on refunds, according to the IRS, is to file a complete and accurate tax return. In the case of an error-free, electronically submitted return with direct deposit of the payment, the refund is usually made within 21 days.
However, experts say it’s important to have all your tax forms ready before you send your tax return. Employers and financial institutions send out tax forms each year, with a copy going to taxpayers and the IRS.
“When something is stated on a tax return, the IRS knows it’s coming,” said Nicole DeRosa, senior tax manager at accounting firm Wiss, noting that the missing information could trigger a tax assessment from the agency, along with potential penalties and Interest charges.
You can create a checklist of the forms you might need by reviewing last year’s tax return, experts suggest. If you’re still not ready by April 18, you can request an extension, Jaeger said. But you must pay your balance due by the tax date to avoid penalties and interest.
3. There is a one year lag for 1099-K reporting
Whether you’re a gig economy worker, an online seller, or transferring money between family and friends, payments from apps like Venmo or PayPal have become a confusing tax topic.
Although business income has always been taxable, individuals and the IRS should only receive Form 1099-K if payments exceeded a threshold of more than 200 transactions totaling over $20,000 in 2022.
If you receive the form by mistake, the IRS says to contact the issuer immediately. However, tax experts recommend including the details of the form on your tax return to avoid a discrepancy with the agency. “If you got one, you want to report it,” Jaeger said.
Originally, the 1099-K reporting threshold was supposed to change for 2022, even dropping to $600 for a single transaction. That means many more applicants would have received Form 1099-Ks this season — but the IRS pushed back the reporting change to 2023.
But even if you don’t receive the 2022 business payment form, you still need to include that income on your tax return, DeRosa said.