There is a good chance that you will not be pleased with the IRS’s latest warning.
According to reports, this year, several new changes to the tax code are reducing the size of the average American’s tax return. In other words, this year’s tax return is likely to be smaller. The Internal Revenue Service admitted as much in a November news release regarding tax filing.
There are numerous reasons for this. First, Economic Impact Payments are no longer in effect, and second, specific charitable contributions are no longer deductible by taxpayers. Business-related media report that following the COVID-19 pandemic, Congress expanded the number of charitable contributions eligible for tax deductions.
These modifications were extended through 2021 but are no longer applicable moving forward. In addition, the American Rescue Plan Act of 2021, proposed by the Democrat Party, permits the government to take a more significant portion of earnings processed by payment processors.
According to the IRS, the bill reduced the threshold for reporting such payments. Previously, any person earning more than $20,000 through 200 transactions in a year was required to file Form 1099-K. Those who receive a single transaction of $600 must now submit the same form.
The IRS warned that taxpayers should not rely on receiving their 2022 federal tax refund by a certain date, particularly when making large purchases or paying bills. Some returns may require additional review, and processing times may be extended. That will result in longer wait times for tax returns.
It appears that taxpayers are beginning to feel the effects of President Joe Biden’s decision to expand the size of the government’s tax-collection apparatus significantly. State media reported in September that the Inflation Reduction Act included $80 billion for the Internal Revenue Service. This funding increased the number of tax audits, hired new agents, and improved the department’s technology.
Last August’s analysis of the increase in IRS funding hypothesizes that the IRS will increase audits of lower-income households. It will use the overly complex tax code as a weapon against lower-income Americans who misinterpret the code.
In other words, the IRS will set up the taxpayer for possible fines.