Millions of Americans could be in for a "refund surprise" when they file 2022 tax returns because many of the pandemic benefits that were enacted to help make the crisis less disruptive have expired.
As a result, families may see smaller refunds when they file their taxes for the current tax year early next year, according to Mark Steber, chief tax information officer at Jackson Hewitt.
According to IRS data, the average tax refund in 2022 jumped 14% from the year before and was nearly $3,200.
Steber told CBS News that the benefits that inflated this year's refunds – from federal stimulus checks to the expanded Child Tax Credit – have largely expired.
The year 2021 "was quite a remarkable year with the insertion of all those new tax breaks," Steber said. "But jump ahead to this year, and a lot of the increases expired, hence the term 'refund shock' or 'refund surprise.'"
While many of the tax benefits still exist, they have reverted to their smaller, pre-pandemic levels under current tax law.
According to Steber, the typical tax refund next year will likely be around $2,700, or about what taxpayers got in 2021, for their 2020 taxes. Although each taxpayer's situation is different, Steber cautions against using your tax refund from earlier this year to figure out what you'll receive in 2023.
"You're probably going to have not as pleasant an experience as you had last year," he told CBS.
Some of the tax changes in 2022 that could impact your refund include:
- No stimulus check: There were no stimulus checks issued in 2022, with the final payment authorized in the spring of 2021 under the American Rescue Plan Act. These checks affected tax refunds received earlier this year because they were paid in 2021 and reflected in tax returns filed in early 2022.
- A smaller Child Tax Credit: Parents of children under 6 received $3,600 and parents of children ages 6 to 17 received $3,000 under the Child Tax Credit in 2021. In 2022, however, that tax credit has been returned to its pre-pandemic amount of $2,000 per child, regardless of age. The smaller tax break could have an impact on parents' refunds.
- A smaller Child and Dependent Care Credit: This credit, which helps parents pay for child care, was increased to up to $8,000 per family under the American Rescue Plan. It has also reverted back to its pre-pandemic level of up to 35% of up to $6,000 in qualifying expenses for two or more children.
- Earned Income Tax Credit has dropped: Aimed at low- and moderate-income workers, the Earned Income Tax Credit was increased during the pandemic for adults without children. Low-income workers without children were eligible to receive a credit of up to $1,500 in 2021. But in 2022, this credit has dropped to $560 for this group.
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