A 2022 tax surprise… your tax liability may have increased. Check this out. For the past several years, your tax preparer has handed you a prepared tax return showing a modest refund, but still, it’s a refund.
Now, take a deep breath; a refund might not happen this year! You may OWE the IRS money.
Here are some things to watch for that can increase your tax liability and cause a hefty tax bill.
The new tax laws.
Multiple bills were passed to pay for government programs, some now being accounted for on this year’s tax return. While the goal of the legislation is to reduce taxes, several changes could cause you to pay more taxes, including:
- Repayment of excess economic stimulus checks.
- New taxability of unemployment benefits.
- Accounting for any small business loan and grant benefits.
- The need to take required minimum distributions once again in 2021.
Your kiddos are no longer eligible. This year’s child tax credit is a significant increase versus prior years. But if you already received the money through the advance child tax credit payment system, it would impact your refund this year. Also, as your kids get older, they grow out of lots of things, clothing, hobbies, and tax credits.
Here are some age requirements for the most popular tax benefits:
- Child and Dependent Care Credit: under age 13
- Child Tax Credit: over age 17
- Earned Income Tax Credit: under age 19 (24 if a qualified student)
Earnings with Social Security benefits.
If you are recently retired, you began collecting Social Security Benefits, then took a part-time job, you are in for a tax surprise. These extra earnings could not only make your Social Security benefits taxable, but it could also result in a reduction of benefits received.
Other life events.
Some life events could provide a tax surprise for you, while some may have favorable tax consequences, such as a new baby or becoming the head of household, while others might result in an additional tax. Other everyday life events include retirement, divorce, death, and entering/leaving school that can impact your circumstances.
Capital gains surprises from mutual funds. Mostly, sales of investments are not haphazard and are planned out with your financial adviser. However, many mutual funds sell assets, which can generate a capital gain statement, and you end up with a surprise taxable event.
As an Enrolled Agent, Jeffrey Schneider, EA, CTRS, ACTE is a specialist in tax and can help you get you the largest refund available. Contact us for tax help before you find yoursef in a #taxjam.
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