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IRS: Your tax return could be smaller in 2023

The IRS warns that refunds could be smaller in 2023. Here’s why

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A blank 1040 tax form with a pen to the left and a calculator to the right.

Your tax return might be smaller next year.

Adobe Stock

2023 tax returns could potentially be smaller than they were in 2022, due to a change in the way charitable donations are deducted, the IRS reported.

Why? One of the reasons tax returns may be smaller next year is because there were no stimulus payments in 2022, the IRS said.

  • Additionally, “taxpayers who don’t itemize and take the standard deduction, won’t be able to deduct their charitable contributions.”
  • CNBC reports that this is due to the ending of a pandemic-era reception that ran through 2020-2021, which allowed deductions of up to $300 for donations to charities. This exception is not being carried into 2023.

Venmo tax: The IRS also noted that anyone who has earned over $600 from third-party payment services, such as Venmo and PayPal, will have to report that income in their taxes, according to NBC. The previous amount was $20,000.

  • However, this doesn’t apply to payments that were personal gifts from friends or family, or reimbursements for personal expenses.

Should taxpayers be worried? Mark Steber, the chief tax officer at Jackson Hewitt, told USA Today that taxpayers shouldn’t worry too much about their 2023 returns.

  • “There are still many tax benefits, credits, deductions, and many ways to pay the minimum amount of taxes you owe and get the biggest refund you can,” Steber said.

Looking ahead: With tax filing season just over a month away — Jan. 24 — the IRS recommends that taxpayers start preparing now.

  • “When filers have all their tax documentation gathered and organized, they’re in the best position to file an accurate return and avoid processing or refund delays or receiving IRS letters. Now’s a good time for taxpayers to consider financial transactions that occurred in 2022, if they’re taxable and how they should be reported,” the IRS stated.
  • They also recommended that taxpayers keep a record of tax-related information in one place and at least three years of previous tax return records on hand for further reference.