(RepublicanNews.org) – The tax filing season officially began this year on January 29th, with the Internal Revenue Service (IRS) accepting American tax returns from that date until the deadline of April 15th. This deadline can be pushed back to October, however, by applying for an extension. With many Americans feeling the pinch of continued inflation, some will at least be relieved to find a larger tax refund than in previous years – although not everybody will benefit from this.
The tax bracket change that should see increased refunds for many is part of the IRS’s attempt to prevent so-called “bracket creep”. Bracket creep is the undesirable side-effect experienced when a taxpayer receives an increase in pay designed to combat high inflation. The increased pay does not necessarily result in any improvement in their standard of living, but does push the taxpayer into a higher earnings bracket, and so into a higher tax bracket. The IRS has altered the income tax brackets from their previous setting in 2022 with the aim of reducing many Americans’ income tax bills. The agency has also increased standard deduction amounts, which should reduce the tax bill for the 90% of American taxpayers who claim them.
Certain taxpayers are eligible for additional deductions, such as those over 65 and the blind. Families on low income who have children should also see more money in their pocket with an expansion to the Earned Income Tax credit. Others will be less fortunate, such as retirees paying tax on their Social Security benefits – their threshold has not only not been adjusted for inflation, but it has not changed since 1984.
Taxpayers who have tried to beat inflation by taking on extra jobs or by earning money with a “side hustle” have been warned to take extra care when filing their taxes, as any mistakes they may have made in filing throughout the year could result in a heftier than expected bill now. Kathy Pickering, Chief Tax Officer for H&R Block, said that her business often sees people “underestimating their tax liability” in such a scenario. She has advised taxpayers to be cautious with their budgets. As well as this, any taxpayer who has made over $5,000 in an online marketplace or payment app will need to file a 1099-K form next year, so it is important to keep accurate financial records now to avoid problems in the future.
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