*all information in this article has been provided, directly, by the IRS.
We are halfway through the 2023 tax season and as a tax industry professional you have likely already filed plenty of tax returns for your clients. By now you have likely run into issues regarding the changing tax credits for this year. It is true that many tax credits that were created or expanded on to help with the COVID-19 pandemic have since returned to pre-COVID levels, this means many of your clients will be receiving smaller returns than last year. In this article we go over the changing tax credits as well as general tips for assuring you and your clients have a smooth tax season
Before Filing
Taxpayers will need to wait until they have all their necessary tax documents before trying to file. In many instances employers won’t have sent out W2s until February. Strongly encourage your clients to organize their documents before submitting them to you, the tax preparer. If any of their information looks inaccurate then encourage them to create an IRS online account to access information regarding their federal tax records, payments, and more.
Changes to Credits
Firstly, unlike the previous two years there will be no economic stimulus payment alongside the regular tax return. The Inflation Reduction Act of 2022 has also renewed and, in some cases, expanded on many clean energy tax credits. You can read our full article going over the 2022 Inflation Reduction Act here. Furthermore, there have been changes made to the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and Child and Dependent Care Credit, reducing them to pre-COVID levels. The EITC will be reduced from the $1,500 eligible taxpayers received in 2021 to $560. Qualifying dependents of the CTC will also be reduced from $3,600 per dependent to $2,000. Finally, the Child and Dependent Care Credit will return to its pre-COVID level with a maximum deductible of $2,100 instead of $8,000. You will need to inform your client of these changes and let them know not to expect as big a return this year.
Premium Tax Credit
We have been receiving numerous questions in regards to Form 8962. Form 8962 is for the Premium Tax Credit which still has temporary expanded eligibility. If a return is rejected from the IRS and they give this code F8962-070 as the reason then that means the client, a spouse, or a dependent has insurance through the Health Insurance Marketplace and should have received a Form 1095-A. If your client claims they have not received Form 1095-A then they can access it by logging into their account on healthcare.gov. However, if your client claims that neither them, their spouse, or any of their dependents have their insurance through the marketplace then they must provide an explanation which you, the preparer, can enter under ACA Explanation in the software.
We understand taxes are complicated. Constantly shifting rules and regulations can add to the difficulty of filing returns for your clients. Swift Financial Partners is dedicated to the education and success of tax professionals like you. If you have any questions please reach out to us here. If you would like to learn more and be alerted to our latest blogs and article then fill out the form below.
