IRS warns tax refunds may be ‘somewhat lower.’ With high inflation, that’s a ‘double whammy’ for families, says advisor

If you’re banking on a tax refund, it could be “somewhat less” than last year’s payment their’s,

Typically, you can expect a federal refund if you overpaid annual taxes or withheld more than you owed. Experts say one of the big reasons for the lower payouts this year is the end of pandemic relief, which was distributed through tax breaks for 2021 returns.

Meanwhile, many Americans are still struggling financially, with nearly one-third depend on their tax refund To make ends meet, a recent Credit Karma survey found.

Joe Buhrman, certified financial planner and senior financial planning advisor at eMoney Advisor, said smaller refunds and higher inflation could be a “double whammy” for some families.

The average refund for the 2022 filing season was $3,176 as of October 28, up nearly 14% from $2,791 in 2021. their’s,

Thanks to the 2021 US rescue plan, many families get a boost from increased growth child tax creditValue up to $3,600 per child, and child and dependent care tax credit Up to $4,000 per dependent.

But those tax breaks have returned to previous levels. For 2022, the Child Tax Credit is reduced to a maximum of $2,000 per child, and the Child and Dependent Care Tax Credit is back to $1,050 per dependent. “That money is out of refunds,” Buhrman said.

If you didn’t get the third stimulus payment, there was a chance Claim it on your 2021 returnFurther padding refunds, he said.

Another pandemic-era change was a more generous charitable deduction in 2021, allowing filers score a tax breakeven if he has not itemized the deductions.

Tony Molina, a certified public accountant with Wealthfront, said the deduction — $300 for single filers or $600 for married couples filing jointly — was a “meaningful amount” for a lot of Americans.

while there aren’t many ways Increase your refund or lower your bill Before the April 18 tax deadline, you may still have some options, Molina said.

“An easy thing to do that you can still contribute to the traditional [individual retirement account]”And does it count for last year, he said, which can offer tax deductions. Your tax break eligibility Depends on your income and workplace retirement plan participation.

there is still time for health savings account contribution For 2022, that also provides the deductible, assuming you have a qualifying high-deductible health insurance plan.