The IRS recently announced that taxpayers may notice a smaller tax refund beginning in 2023 compared to the last two years. This is primarily due to the lack of government financial support in 2022. In the previous years, citizens had been able to receive additional stimulus payments with their refunds if they hadn’t received stimulus payments in advance. This will not be occurring in 2023 as there were no Economic Impact Payments in 2022.
Another big change to note is if you choose to take the standard deduction, you won’t be able to deduct charitable contributions. In 2021, the IRS allowed taxpayers to temporarily deduct $300 per person or up to $600 per family, in charitable contributions. This was allowed even if they didn’t itemize other deductions, however, this will not be the case for 2022 taxes.
Another thing to keep in mind for 2023 is that the reporting threshold for those who use third-party networks in order to receive payments has been lowered. Originally required to begin for 2022, the IRS put on hold for one year the filing requirement for payments received through Venmo, CashApp, PayPal and other platforms.
Prior to the change, form 1099-K was issued to report payment transactions if the recipient had more than 200 transactions for a single year or the aggregate amount of transactions was more than $20,000. Now, if an individual’s payments exceed $600, Form 1099-K will be triggered.
If you receive money through companies such as AirBnb, Uber, or DoorDash, income from these endeavors will be reported to the IRS. If you use a third-party app to be reimbursed by a friend or relative for personal transactions, this is not taxable and will not be reported.
This new reporting requirement will increase income to report for many, so be sure to review your reporting requirements if you have short-term rentals, drive for ride-sharing platforms, assist with food delivery, or sell products online.
In conclusion, it is important that you not rely on your tax refund to pay for major purchases like you may have done in the past. The IRS has also stated that some returns may take additional time to review which in turn can result in your refund being received later than expected.
https://www.cpapracticeadvisor.com/2022/12/07/tax-refunds-may-be-smaller-in-2023-irs-warns/73898/
