December brings with it the festive season, holidays, reunions, and hope for a better new year. and this has been particularly strong for people with low and moderate-income as they had to suffer one of the toughest years in living memory as rising prices ensured that households had to make concessions in practically all departments of their household expenses, especially in the absence of any stimulus check.
The IRS has already warned that taxpayers should not expect much by way of an income tax refund, at least not on the lines of the 2020 and 2021 tax years. in a release in November, the IRS revealed that the refunds may be smaller in 2023 as they advised about preparing for the upcoming tax season.
The absence Of Stimulus Checks In 2022 Will Also Negatively Affect Tax Refunds in 2023
Americans who have come to depend on a tax refund from the federal administration in the past two years that marked the COVID-19 pandemic and its aftermath should prepare for the likelihood of a much smaller stimulus check, revealed the Internal Revenue Service.
Filers normally get a refund stimulus check if they had excess money withheld by the IRS or if they have overpaid their taxes in the previous year. for households, the amount can go up substantially. The tax refund in 2022 covered close to 75% of tax filers and the average payment was around $3,176, well above the average of $2,800 in 2021.
But for obvious reasons, the IRS has cautioned taxpayers that they should brace for a much smaller refund against the 2022 income tax returns to be filed in the first quarter of 2023. There are no stimulus checks in 2022. The last stimulus check was the Economic Impact Payment paid under the American Rescue Plan Act signed by incoming President Biden in March 2021. Many citizens claimed unpaid stimulus checks against their income tax returns.
The IRS has said that filers will not receive any additional stimulus check with the 2023 income tax refund as there was no economic impact payment in 2022.
The tax authorities have also noted that the pandemic period exception granted in the last two tax years that let individuals claim standard deductions of up to $300 for cash donations is no more valid.
the IRS has cautioned households not to rely on benefits from any refund in the 2022 tax year while making major expense decisions. They said that many refunds would be subject to longer periods of scrutiny before passing muster.
This has become a cause of concern for millions of households, especially in the low and middle-income categories who have come to depend on the incoming federal funds to go in for major purchases in the past two years.
These refunds have been a major reason behind the spike in purchases in the months after the pandemic eased and helped prop up the economy while preventing a deep recession along the lines of the Great Recession in 2007-09.
In 2022 close to half of the taxpayers have said that the income tax refund helped them decide on major purchase decisions, cushioned the economic impact of the pandemic, and saved the economy from sinking into a deep recession.
Absence Of Federal Stimulus Checks Compensated Partially As States Step In
Even as the economic recovery in the post-pandemic period has been affected by record inflation, the absence of federal stimulus checks has made it harder for Americans to cope with the crisis. the rise in prices has continued unabated for a year, adding to the predicament.
In this situation, the introduction of state stimulus checks has proved to be of great help during such record inflation. Every product and service has been affected and the rise in the price of gasoline, groceries, and home rent has been particularly hard for low and moderate-income groups.
California has been among the few states that have timed their stimulus check for the festive season. The payments started on October 7 and are expected to continue through January 14, 2023.
Initially, payments of up to $1,050 were made through direct bank transfers to taxpayer accounts. The initial round of payments went to filers who received their Golden State stimulus check Round I or II through the same payment processor.
The payments were followed by payments to taxpayers who filed their earlier income tax returns through the online process. Finally, the last round of stimulus checks will go out to filers who went for the paper process. Their payments will be given through debit cards mailed to the address entered in their records with the California Franchise Tax Board.
The payments have been divided into three tiers depending on the Adjusted Gross Income of taxpayers in the California state returns for 2020. Payments will only go out to taxpayers who filed their returns before October 15, 2021.
Individual filers with a 2020 AGI of above $250,000 for individual filers and above $500,000 for married couples filing jointly will not be eligible for the California Middle-Class Tax Rebate.
The highest stimulus check amount of $1,050 will go out to joint filers with a combined AGI for 2020 of $150,000 or less. Each filer gets $350 plus another $350 if they declare any dependent. The amount allotted to the dependent is the same irrespective of the number of dependents.
The tax rebate gets progressive lesser with each tier and individual filers with an AGI of between $125,001 and $250,000 and joint couples filing jointly and with a combined AGI of between $250,001 and $500,000 will get $200 for each filer and the same amount if they include dependents in their AGI.
Other states that have timed their inflation-linked stimulus checks to coincide with the festive season of 2022 include Colorado. Residents received $750 for individual filers and double that for married couples filing jointly. The payment goes to our residents who have filed their 2021 state income tax returns or have applied for a PTC rebate (property tax/rent/heat/credit).
Idaho residents also receive their stimulus checks from the state administration later in the year. the payments have been divided into two parts. The first payment is equal to $75 for each family or 12% of the tax liability before credits, whichever is larger.
The second payment is greater than the $300 for individuals and doubles that for couples or 10% of the tax liability before credits.