Refunds are Smaller this year: 2023 Tax Tips
It’s true….many households are receiving smaller tax refunds than the prior two years due to the expired COVID-19 tax benefits. The Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) are both smaller and less impactful on refund #s this year. Not sure what these credits are? See our tax definitions section below.
Wondering how much you can get or want to make sure you get the maximum EITC, check out this article by the team at The Get It Back Campaign. Not sure what the child tax credit is or how much it should be getting based on who you claim on your taxes, here's what you should know.
Even though refunds are smaller, it's still best to file your taxes ASAP and file them for free if possible so that you can get the largest refund you are entitled to.
Have a plan for your refund
Our clients tell us they have a general idea about if they will get a tax refund or owe. If you typically get a refund, have a clear plan for how you want to spend the money. Even if you don’t know the exact amount, set aside 50% of it to pay down debt or put it into savings for a rainy day.
Take 2 minutes to jot your plan down on paper and put it somewhere you’ll see or tell someone you trust what your plans are and ask them to follow up to make sure you stick to it.
What if I think I’m not getting a refund?
It’s still best to file ASAP. IRS, and many state agencies, charge larger penalties and fees to those who don’t file taxes than those who file and pay later.
What if I owe and I can’t pay it?
If you owe and you are worried you’ll never be able to pay back that debt, the IRS has options to have some or all of your debt forgiven. If you make under $50K, you can visit a Low Income Tax Payer Clinic (LITC) and the pro bono lawyers will help reduce the amount you owe to the IRS (in some cases they can reduce it to $0. Visit this site to find a LITC.
Still, need to do your taxes? Try these resources*:
Get your taxes done in person for free! Find a VITA site near you.
My Free Taxes powered by United Way is free for anyone making under $73K. Answer a few questions, create an account, and file your taxes. [closed until Jan 2024]
Cash App offers free tax prep that is mobile-friendly and mostly painless [closed until Jan 2024]
At My Money Story, we believe talking about money shouldn't be taboo and we want to create a safe space to achieve our financial goals together.
Tax terms you should know:
Tax Credit: A tax credit can reduce what you owe on your taxes and in some cases, can increase the amount of your tax refund. A tax credit is typically more helpful to those making under $70K than a tax deduction.
Tax Deduction: This reduces your tax liability, meaning if you owe, it can take the amount you owe to zero, but it doesn’t typically increase your refund. They are helpful, but usually not as helpful as tax credits for those making under $70K
Earned Income Tax Credit (EITC): A credit for those making $14K - $58K that generally increases refunds. How much your refund increases depends on if you are claiming any other depending on your taxes. If you hear of people getting large refunds, this is a big part of the reason why in many cases.
Child Tax Credit (CTC): This year, the CTC was worth $2000 per child for every dependent claimed on your taxes that is age 16 or less. $1400 of that $2K per child can increase your refund. Last year it was $3500 per child and a portion of the credit was paid in advance. This credit helps parents get bigger tax refunds while their kids are young.
Low-Income Tax Payer Clinic (LITC): These are free programs hosted by nonprofit pro bono lawyers to help address tax issues for those who can’t afford to pay for a tax lawyer. They can help your tax debts be forgiven, in some cases.
Volunteer Income Tax Assistance (VITA): A free program for those making ~60K to get their taxes prepared by a certified volunteer. It’s often hosted by nonprofit partners and is available across the country.
*Disclaimer: We don't get referral fees for any product or resource recommendations. Lsting a resource in this newsletter does not constitute an endorsement of its services/products.
