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IRS is accepting tax returns: Why could you owe money this year?

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The Internal Revenue Service (IRS) has officially begun accepting and processing tax returns for the 2022 fiscal year. However, taxpayers should be prepared for smaller refunds than in recent years due to changes in COVID-era relief measures.

According to Mark Steber, Chief Tax Information Officer for Jackson Hewitt Tax Services, changes to credits such as the child tax credit, dependent care credit, earned income credit, and the option to deduct charitable donations without itemizing taxes will be reverting back to pre-pandemic amounts. This means that taxpayers who were counting on these double-sized credits may find themselves under-withheld and without a refund.

Additionally, changes in employment status, such as starting a new job or receiving supplementary wages, may also impact refund amounts. Unemployment compensation that was not considered taxable during the pandemic is now subject to taxes, and those who did not ask for withholding on this compensation may find themselves with smaller refunds or owing taxes.

Self-employed individuals, those with side gigs, or those who earned $400 or more from part-time or temporary work may also see a difference in their taxes this season. According to Steber, these taxpayers may not have made estimated payments or may have opted to pay in a lump sum during tax season, resulting in owing balances to the IRS.

The IRS recommends that taxpayers file their taxes early, regardless of whether they will owe money or not. Those who are unable to pay the full amount they owe can explore payment options, including short-term and long-term payment plans. The tax filing deadline for the 2022 fiscal year is April 18, due to the observance of Emancipation Day in the District of Columbia.

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