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Are income tax refunds smaller this year?

The average income tax refund jumped to $3,253 in 2022, up from $2,863 the previous year. The Internal Revenue Service is alerting taxpayers about a number of changes hitting in the 2023 tax filing year.

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The Internal Revenue Service is alerting taxpayers about a number of changes hitting in the 2023 tax filing year. Among the most significant: Your tax refund, if you are eligible for one, may be smaller than the one you received in 2022. That's because there were no federal stimulus payments issued in 2022 — and many taxpayers received their stimulus checks alongside the refunds they got after filing their 2021 tax returns. The average refund jumped from $2,863 in 2021 (for the 2020 tax filing year) to $3,253 in 2022 (for the 2021 tax filing year). Another change: Taxpayers who take the standard deduction instead of itemizing their deductions won’t be able to use their charitable contributions to help lower their taxable income. The tax preparation website CPA Practice Advisor notes that in 2021, the IRS allowed individuals to deduct $300 per person, or up to $600 per family, in charitable contributions even if they didn’t itemize other deductions. That allowance will no longer be available. Finally, the IRS is reminding taxpayers transactions that earned them $600 or more must be reported, including ones made on third-party apps like Venmo. Prior to 2022, tax forms were required only if the transaction exceeded $20,000. But you do not have to report money received through third-party payment applications from family or friends that came as personal gifts or reimbursements for personal expenses, the IRS says. The agency is also warning filers not to expect their refunds by a certain date, adding that it is taking extra measures to ensure against identity theft and tax fraud. That additional due-diligence by the IRS means it could take longer for the agency to review your tax return. As context, the IRS said, as of Nov. 11, it was still processing 3.7 million individual returns, including tax year 2021 returns and late-filed prior year returns. Of those, it said, 1.7 million of them required error correction or other special handling, and 2 million were paper returns waiting to be reviewed and processed.

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Why is my refund so low 2022?

Typically, you get a federal refund when you've overpaid yearly taxes or withheld more than the amount you owe. You may receive a lower refund because there was no stimulus payment in 2022, and there's a less generous tax deduction for charitable gifts, the IRS said.

If you're expecting a tax refund in 2023, it may be smaller than this year's payment, according to the IRS. Typically, you get a federal refund when you've overpaid yearly taxes or withheld more than the amount you owe. Your annual balance is based on taxable income, calculated by subtracting the greater of the standard or itemized deductions from adjusted gross income. "Refunds may be smaller in 2023," the IRS said in a November news release about preparing for the upcoming tax season. "Taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no economic impact payments for 2022."

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The agency issued the third round of stimulus payments worth $1,400 per person in 2021, and eligible Americans could claim unpaid funds on their tax return this year. The average refund for the 2022 filing season was $3,176 as of Oct. 28, according to the IRS, up nearly 14% from $2,791 in 2021.

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