The 2023 tax season is currently underway, beginning on January 23rd. Taxpayers have until April 18th, 2023, to submit their 2022 tax returns. However, those who need more time may request an extension, granting them an additional six months to complete their paperwork. Despite the extension, taxpayers must still pay any taxes owed by Tax Day. Millions of Americans have already filed their taxes, and refunds are being issued.
This year, it is expected that tax refunds will be less due to the cessation of enhanced tax credits and stimulus payments from the IRS. Nevertheless, taxpayers may still be eligible for thousands of dollars to reduce their tax burden or increase their return. To claim a tax refund, individuals must file a tax return and meet the requirements. One such credit that taxpayers may be eligible for is the Child Tax Credit, which can be worth up to $2,000 per qualifying child for qualified taxpayers.
People who are exempt from filing a tax return may still be eligible for a refund if they file a tax return. These taxpayers may use the IRS's Free File programs to electronically file their tax returns at no cost, as per AS.com. These online programs guide tax return filers through the various tax credits. To speed up the processing of tax returns, the IRS encourages taxpayers to file online and use direct deposit to receive their refunds faster. Even if taxpayers are not required to file a tax return, they must file one to claim the Child Tax Credit. Taxpayers may be eligible to claim a portion of the credit and receive it as a tax refund, even if they have no outstanding tax liability with the government.
The Earned Income Tax Credit (EITC) and the Child and Dependent Care Tax Credit are additional credits that may result in a lower tax liability or a larger refund. The Child Tax Credit has been modified for the 2022 fiscal year, reverting to the eligibility requirements in place before the Tax Cuts and Jobs Act of 2017. The credit is partially refundable this year, and there is an income threshold to begin claiming the refundable half, known as the "Additional Child Tax Credit," which is worth up to $1,500. For the 2023 tax year, the barrier will climb to $1,600.
The refundable portion will be added to the tax refund of taxpayers who owe fewer taxes than the refundable amount, while the non-refundable half will reduce taxes owed dollar-for-dollar. Taxpayers must file Form 8812 to receive a refund. The Child Tax Credit will not be eliminated but restored to its previous levels.
Before taxpayers can claim the tax credit, they and their children must meet several requirements, such as income limits of $400,000 for married couples and $200,000 for all other taxpayers, citizenship or permanent residency of the United States, and a valid Social Security number for each eligible child.
Furthermore, the qualified child must be a legally recognized stepchild, foster child, sibling, half-brother, or half-sister, or a descendant of one of these groups, such as a grandchild, niece, or nephew. Taxpayers must have contributed at least half of the child's financial support from the previous year, and the eligible child must have resided with the taxpayer for more than six months. Taxpayers must also claim the child as a dependent on their tax return.
President Joe Biden has proposed increasing the Child Tax Credit from $2,000 per child to $3,000 per child for children aged six and older and $3,600 per child for children under six in next year's tax returns. As part of pandemic relief, parents received an enhanced Child Tax Credit in 2021, but the benefit expired despite Democratic attemptsto extend the benefit.
In addition to the Child Tax Credit proposal, the budget proposal announced on Thursday by President Biden promises universal, free preschool education nationwide and 12 weeks of paid family leave. The budget also includes increasing the Medicare tax rate from 3.8% to 5% for individuals earning more than $400,000 annually. The budget aims to increase the number of pharmaceuticals for which Medicare negotiates pricing and accelerate the negotiation process for new drugs.
According to the White House, the budget contains $59 billion in mandated spending and tax incentives to increase the supply of affordable housing. The budget proposal also includes increasing the Pell Grant by $500 per student and increasing free community college tuition, as reported by WXYZ.
In conclusion, the 2023 tax season is already underway, and taxpayers have until April 18th, 2023, to submit their 2022 tax returns. Taxpayers may be eligible for thousands of dollars in tax refunds, including the Child Tax Credit, the Earned Income Tax Credit, and the Child and Dependent Care Tax Credit. Taxpayers who are exempt from filing a tax return may still be eligible for a refund if they file a tax return and meet the requirements. President Biden has proposed increasing the Child Tax Credit, and his budget proposal includes several other measures to support families, students, and low-income individuals.