Chris Janeway, CPFA and president of Fourth Point, joined Cheddar News to discuss why your tax refund may be smaller next year.

Chris Janeway, CPFA and president of Fourth Point, joined Cheddar News to discuss why your tax refund may be smaller next year. "Obviously we were unexpectedly high due to some of the stimulus from the prior year," he said.

IRS Says to Expect Less From Tax Returns Next Year

Well some bad news for taxpayers expecting a refund in 2023. The i. r. s. supporting the checks could be smaller because there were no stimulus payments in 2022 and a less generous acted up shin. Excuse me for charitable gifts going forward. Well typically a federal refund is issued when you've overpaid your taxes or withheld more than the amount that you owe. So joining me now is chris janeway president at fourth point wealth, a retirement and investment planning company chris thank you so much for coming on the show. So how much less should people expect from their tax return next year? Yeah. The average refund for filers going into April of this year was around $3100 which was up from 2800 or so. The prior year I'd expected to probably fall back down to a similar amount as as the 2020 tax refunds. So you know there's a few, a few big changes. One obviously we were unexpectedly high due to some of the stimulus from from the prior year. A lot of people that didn't collect their stimulus checks through the year were able to get them As part of their refund. That's that contributed to the big jump for 2021. But wages are up and there's a couple of big changes, especially hitting families this year. So the child tax credit is going down from what you can claim of up to $3600. That's going down to 2000 this year. And the dependent care credit and this is kind of a big one. As part of the American rescue plan, they increased the amount that you could claim for last year And that was between 8000 up to 16,000, that's dropping way back down now, 3000 up to 6000. So a couple of huge changes. I know they mentioned the charitable deduction as well. That was a much smaller contribution. Uh, you were able to on a standard filer, you were able to write off about 300 or 600 if you're married filing jointly, no longer will that be available? Standard filers can't take a charitable deduction. Okay, walk through chris what else our viewers seem to know about charitable donations and deductions, especially as we approach the end of the year and we know that the holidays are a popular time to give back. Yeah. So if you're an itemized filer, it really doesn't change a whole lot for you. But again, it's, if you're filing is a standard deduction, you're no longer going to be able to write off those charitable contributions and that could really be hurting the nonprofit communities that that head into the year end and really rely on those even small checks from families just making a small difference along the way. So that's a, that's a big deal. Um, and then there's a sneaky, the thing that's going to kind of come up, come up for for, for people if they're looking at facebook marketplace and they're doing some transactions, it used to be that if I was selling items etcetera, it was 200 transactions with an aggregate of $20,000 that I collected before I really got a 10 99 and needed to claim that and all of a sudden it's going it can even be one transaction for $600. And so all of a sudden you know that guy That's suddenly online, I may be getting a 1099K. And having to claim all that. That's the one that I think could really sneak up on folks. Okay so Chris for people who do live paycheck to paycheck and we know that that percentage now is over half of Americans as they try to budget for the year ahead and take these tax deduction and refund considerations into account, what advice would you give them to make sure that they can make their payments? Yeah. So you know I was surprised when I looked into this that over three quarters of filers actually collect a pretty significant refund each year. And again that's $3100 right now, that's over $250 a month that we're giving as an interest free loan to the I. R. S. And I'm pretty sure that if we have car loans or credit card payments, those aren't interest free. So the first thing that I would probably look at as we head into year end is really getting organized for what can I do between now and the end of the year. Have I contributed to retirement accounts or my H. S. A. S. Am I going to file as a as a standard deduction or or would I be itemizing? So doing some of that planning before for the year end is really important. And then as we get into next year it's time to look at our withholdings. If we're getting a big refund it may be time to put that money back in your pocket by adjusting your withholdings and start using that towards your own debt throughout the course of the year writing those things back down a little bit more aggressively. Okay so some people do have to actually pay right, they don't get a refund, they have to actually pay taxes come tax season. And so if that is you any filing tips? Yeah so expect delays. The I. R. S. Has kind of already bird dog that out. So uh there are about a backlog of 3.2 million returns right now and they've hired thousands of people to kind of catch up on that but expect a little bit slower processing and if you want to speed it up, one is always try to e. File and two if you're expecting a refund, especially you wanna mark for direct deposit so that's going to speed up your process a little bit if you can do it. Electronic. Alright chris janeway certified planning Fiduciary Advisor and President at fourth point, wealth chris. Thank you.