The IRS warns that tax refunds may be reduced in 2023.

US dollars to signify smaller tax refunds

The IRS warns that tax refunds may be reduced in 2023.

According to the IRS, a significant factor in 2022 will be the absence of stimulus payments.

The IRS warns taxpayers to expect potentially smaller tax refunds in 2023. One key reason is the absence of stimulus payments for the 2022 tax year.

In a statement, the IRS directly said “refunds may be smaller in 2023.” Economic Impact Payments, or stimulus checks distributed during the COVID-19 pandemic, won’t be included with tax refunds because none were issued in 2022. These extra payments boosted refunds for many taxpayers over the past two years, as the last one went out in March 2021.

Taxpayers who use the standard deduction might also see a change affecting their refund. Previously, in 2021, those who didn’t itemize deductions could deduct up to $300 for individual contributions and $600 for families. This benefit is no longer available. The IRS reports that nearly 90% of taxpayers use the standard deduction.

Third-party payment networks like Venmo or CashApp used for business transactions now face a lower reporting threshold set by the IRS. Before 2022, these platforms had to use Form 1099-K to report transactions exceeding $20,000 in total value and involving more than 200 transactions in a year. The IRS has reduced this threshold to a single transaction exceeding $600 that can now trigger a 1099-K report. According to the tax agency, this change “enables taxpayers to more easily track the amounts received.” Importantly, the IRS clarifies that money sent between friends and family for personal expenses or gifts through these apps is not taxable.

While tax return processing won’t begin until early next year, the IRS advises against waiting for a tax refund to pay bills or make specific purchases. The agency warns that some returns may require further review and could take longer to process.

The tax laws are very complex. Our short blog articles cannot cover in full all the nuances of the rules. We encourage you to find help, rather than trying to figure it all out on your own. Consider giving this marketplace a try by posting your project and signing up here.

If you are a licensed tax professional and are interested in helping others either part or full-time, or ad hoc, come on in! Happy to have you. Our marketplace has the full suite of tools to communicate with clients including compliance calendars, task and message management, and billing. You can also quickly connect to knowledgeable colleagues who can complement your services with the ones you do not provide. Register here.

Picture of iFind Taxpro

iFind Taxpro

1 Comment

[…] According to the IRS, a significant factor in 2022 will be the absence of stimulus payments. You probably won’t get a tax refund that is as significant as you have in the past in 2023, the IRS gave  […]

Ask a question

Data security and privacy are our topmost priorities. Your personal details will not be shared publicly.

Required fields are marked *