Here we go again.
Starting Jan. 23, the 2023 tax season will be officially underway, as the Internal Revenue Service begins accepting and processing 2022 returns.
After a squishy few years of malleable tax law, thanks to the pandemic, the rules are a lot tighter this year. And the IRS has already warned taxpayers that refunds are likely to be smaller—with some people who expect to get money back ending up owing the government instead.
If you do get a refund, it could take a little longer, too. The tax agency has warned that some returns may need extra time to review this year, slowing the process. (This comes as millions are still waiting on their returns from last year to be processed.)
"The IRS cautions taxpayers not to rely on receiving a 2022 federal tax refund by a certain date, especially when making major purchases or paying bills," it said in November.
The good news? Things should be better than last year. IRS watchdog, the National Taxpayer Advocate, said earlier in January that “a light at the end of the tunnel” of the IRS’ customer service struggles is within sight as the agency hires thousands of new workers.
Still, there’s plenty of confusion among taxpayers. Fortunately, you can get free help putting together your taxes—and you can always get an extension if you aren't able to finish in time. Also, there are steps you can take which can get you a refund next year (or a bigger one if you're in line for money back for your 2022 filing).
Here are some answers to the most frequently asked tax questions.
When does tax filing season begin?
The Internal Revenue Service will begin accepting and processing tax returns for the 2022 tax year on Monday, Jan. 23, roughly the same time as last year.
The start of tax season is generally one of two peak times for the IRS, as people with relatively simple tax filings and those expecting big refunds often file as soon as possible. Many people, though, might not have all the paperwork they need at the start of filing season or delay their filing if they expect to owe taxes.
When are my 2022 taxes due?
You've got until Tuesday, April 18 to file your taxes this year, three days later than usual. That’s, in part, because April 15 falls on a Saturday and because of of the Emancipation Day holiday in the District of Columbia. (By law, Washington, D.C., holidays impact tax deadlines for everyone in the same way federal holidays do.)
Not able to make the deadline? You can file for an extension before that date, which will give you until Monday, October 16, 2023 to file. Also, special rules apply to people serving in the Armed Forces who are in a combat zone/ contingency operation or have been hospitalized due to an injury sustained in such an area. Those individuals have 180 days after they leave the area to file and pay taxes.
What tax bracket am I in?
With income levels so drastically affected by the pandemic, tax law changes and more, it’s a good idea to see if your bracket has changed. It will, however, depend in part on how you file.
|
Tax Rate |
Single |
Married couples (filing jointly) |
|
10% |
$10,275 |
$20,550 |
|
12% |
$10,276-$41,775 |
$20,551-$83,550 |
|
22% |
$41,776-$89,075 |
$83,551-$178,150 |
|
24% |
$89,076-$170,050 |
$178,151-$340,100 |
|
32% |
$170,051-$215,950 |
$340,101-$431,900 |
|
35% |
$215,951-$539,900 |
$431,901-$647,850 |
|
37% |
$539,901+ |
$647,851+ |
What’s the standard deduction for the 2022 tax year?
The standard deduction for married couples filing jointly jumped $800 to $25,900. For single taxpayers and married individuals filing separately, the standard deduction was up $400 to $12,950. And for heads of households, the standard deduction will be $19,400, up $600.
Next year, when you file your 2023 taxes, you’ll see those numbers climb to $27,000 for married couples filing jointly (an $1,800 increase) and single taxpayers and married individuals filing separately will see the standard deduction rise to $13,850, up $900. The standard deduction for heads of household will jump to $20,800 for tax year 2023, a $1,400 increase.
When will I get my refund from the IRS?
Typically, the processing time for returns that receive refunds is 21 days. However, that’s no guarantee, and the IRS is warning people “not to rely on receiving a 2022 federal tax refund by a certain date, especially when making major purchases or paying bills.”
The average tax refund in 2022 (for the 2021 tax year) was roughly $3,200—14% higher than the year before, according to tax officials. But this year’s refunds will be smaller as some benefits have lapsed.
More than 168 million individual tax returns for the 2022 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline. The IRS says more than 9 out of every 10 refunds are issued within three weeks of the day the return is filed. The best place to track where things stand is with the Where's My Refund? tool, which updates the status of tax refunds daily.
What's the fastest way to receive my refund?
The best way to speed things along, says the IRS, is to e-file your taxes. That gets the information into the IRS system a lot faster than paper filings.
Step two: Make sure you’ve signed up for direct deposit, as the IRS says that can significantly speed up your refund. It also adds more flexibility. Your refund can be split into up to three separate accounts, including Individual Retirement Accounts.
Why will my refund be smaller in 2023?
During the pandemic, there were several benefits that increased individual refunds. But now, we’re back at 2019 levels.
The child tax credit, for example, will return to its normal rate this year after a big boost for the 2021 tax year. The enhanced rate boosted the credit to as much as $3,600 per child, depending on their age. This year, it reverts to $2,000 per kid under 18. For families with two children under six, that works out to a $3,200 reduction in credits. Similarly, the tax credit for child and dependent care expenses has dropped back to $2,100 this year from its pandemic high of $8,000.
That $600 above-the-line charitable donation deduction is gone. Also, if you’re in one of the more than a dozen states that offered rebates or refunds last year, those checks could count as taxable income on your federal returns, even if you don’t have to pay a state tax on them.
“Refunds may be smaller in 2023,” the IRS said bluntly in a statement last November. "Taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no Economic Impact Payments for 2022. In addition, taxpayers who don’t itemize and take the standard deduction, won’t be able to deduct their charitable contributions.”
I’m a hybrid worker and worked from home for most of 2022. Can I claim a home office expense?
Probably not.
If you received a W-2 form from your employer, any money you spend to improve your home office is not deductible. Home office deductions are reserved for self-employed individuals. So, even if you used your spare bedroom as an office, you won’t be able to write that off (or any ancillary expenses, like a portion of your utilities).
If, however, you work for yourself – and your income is in the form of 1099 statements instead of a W2 – you are able to write off the percentage of your home that you dedicate exclusively to work.
Do I have to pay taxes on my unemployment benefits?
In 2020, in the heart of the pandemic, people who received unemployment benefits caught a break and didn’t have to pay taxes on up to $10,200 in payments. That was a one-time benefit, though.
If you received unemployment benefits in 2022, that is considered taxable income—and if you didn’t have any money withheld when you signed up for those benefits, it could be a significant amount.
I earned a little money on Etsy/Ebay last year. Will I get a 1099 form for that?
Unless you’re a power-seller, probably not—but you will next year.
The IRS has planned to require services like Ebay, Etsy, Venmo and CashApp to issue a 1099-K form when transactions topped $600 as part of the changes that came with the America Rescue Plan. However, right before Christmas it decided to delay that for a year, returning the threshold to $20,000 from more than 200 transactions, as it stood last year.
"To help smooth the transition and ensure clarity for taxpayers, tax professionals and industry, the IRS will delay implementation of the 1099-K changes,” the tax agency announced in a statement.
Next year, though, you’ll have to report that income—though it does not apply to income from personal transactions “such as sharing the cost of a car ride or meal, birthday or holiday gifts, or paying a family member or another for a household bill.”
Is there a free tax filing system?
IRS Free File is a program that provides free online tax preparation and filing with IRS partner sites. You'll need to have made $73,000 or less to use the system, which open for the current tax filing season on Jan. 13.
How much do you have to make to file taxes?
It really comes down to your filing status and age.
People who are single and under the age of 65 who make $12,550 or above will need to file a return, according to the IRS. If you’re 65 or older, the minimum amount jumps to $14,250.
Married filing jointly and under 65, the threshold is $25,100. (It’s plunges to just $5 if you’re filing separately.) If you’re both OVER 65, that jumps to $27,800. And if one spouse is younger than 65 and one is older, it's $26,450.
Heads of household who haven’t yet celebrated their 65th birthday and make more than $18,800 will need to file. That jumps to $20,500 if they're over that age.
Finally, widows and widowers under the age of 65 who make over $25,100 will need to file a return. For those older than 65, $26,450 is the line in the sand.
How do I file for an income tax extension?
Filing for an extension is actually an easy thing to do. The quickest way is via Free File, where you can electronically request one, which will extend your filing date until Oct. 17.
You will, however, need to estimate your tax liability, even if you haven’t calculated it. And you’ll have to pay any owed taxes on that estimate by the regular deadline.
You can also get an automatic six-month extension by using IRS Form 4868, which will also require you to estimate your tax liability, based on the data available to you. In this case, though, you won't have to make a payment immediately, but you will have to pay interest on your tax bill if you end up owing money.
I bought and sold cryptocurrencies last year. Will that affect my 2022 taxes?
If there’s one bright side to the crypto winter, it’s that it could help you in tax season. Through tax-loss harvesting you’ll be able to write off up to $3,000 in losses.
Keep in mind that cryptocurrencies are subject to capital gains, meaning what you owe will depend on how much you gained or lost—and how long you held the tokens. It could be anywhere from nothing to 20% of your profits if you’re a long-term investor. If you jumped in this year, though, and held the crypto for under a year, you’ve triggered short-term capital gains and could owe up to 37% of your returns, assuming you got out before the market collapsed. Ideally, your exchange will provides you a Form 1099-B, summarizing profits and losses, but as 2022 demonstrated, not all exchanges are as reputable as investors believed.
I bought and sold meme stocks in 2022. What sort of tax bill should I expect?
Just like crypto investors, short-term capital gains of up to 37% could apply, depending on when people bought or sold their shares. And losses could offset a portion of other income.
What common tax mistakes should I look out for?
A tiny mistake can bring about big headaches when you’re dealing with the IRS, resulting in everything from a delayed refund to an audit. Here are the most common errors, according to tax officials.
- Missing or inaccurate Social Security numbers
- Misspelled names
- Filing status errors
- Math mistakes
- Errors in figuring tax credits or deductions
- Incorrect bank account numbers
- Unsigned forms
- Filing with an expired Individual Taxpayer Identification Number (ITIN)
What happens if I file my taxes late without filing for an extension?
Bottom line? You’ll end up paying more. There are two kinds of fees and penalties that could be assessed on top of any taxes you might owe—one for filing late and another for paying late. If you file your return more than 60 days late, you’re likely looking at a minimum penalty of $210 (unless you owe less than that – in which case the penalty is 100% of the unpaid tax). Otherwise, the penalty can be as much as 5% of the unpaid tax each month up to a maximum of 25%.
Late payment penalties are generally 0.5% of the unpaid tax per month, though that can build to as much as 25%. (The amount is cut considerably if you work out a payment agreement with the IRS.
Of course, if you file for an extension, these penalties do not apply. Similarly, if you can show reasonable cause for not filing, you’ll avoid them as well. And if you historically have filed on time, you might qualify for the First Time Abatement program, which will help you avoid any fees.
How can I get a bigger refund next year?
Given the revision to rules resulting in smaller refunds (or higher tax bills) this year, taxpayers might be looking for ways to prevent being hit with a tax bill again in 2023. To protect yourself, the IRS’s Tax Withholding Estimator calculator is the best tool. This helps you target a specific refund amount and help you best prepare for it through adjustment withholdings. If you don’t expect major income fluctuations through the year, it’s likely the best option.
Keep in mind that your income tax withholding isn’t based on your marital status and withholding allowances any more. Instead, it's now based on your expected filing status and standard deduction. You can also have itemized deductions, the Child Tax Credit and other tax benefits reflected in your withholding.
