It’s a bit of bad news for divorced parents … and really, all parents and all other people! It comes courtesy of NPR, letting us know that tax refunds will likely be smaller this year than they were last year, and there’s a change in what was known as the enhanced child tax credit at the heart of it.
Some pandemic-related items helped people during the last few uncertain years, which are also going away as we transition back to “normal” life – not that there’s anything normal about where we’re at now.
The article notes, according to financial expert Lynnette Khalfani-Cox, “People should absolutely expect smaller tax refunds this year. And frankly, some people might even owe the government money.
She went on to list four main reasons:
- No more stimulus checks
- Elimination of the enhanced child tax credit
- Elimination of special pandemic-era tax breaks for charitable deductions
- Taxes on investment gains in a volatile stock market year
The child tax credit should be particularly concerning for those counting on refunds. As NPR told it:
For this tax season, many families with two children under 6 years old won’t be able to count on an extra $3,200 worth of tax credits that helped them last year. That’s because while pandemic legislation provided $7,200 in combined tax credits for two kids under 6 in the last tax season, that same family is now looking at $4,000 in credits.
“In 2021, parents were getting what folks call the enhanced child tax credit,” Khalfani-Cox said. “It was either $3,000 for children under 18 or $3,600 for kids under 6 years old.”
That’s now going back down to $2,000 per child, even though the tax credits and other helpful policies nearly halved child poverty rates to the lowest rate on record.
The article recommended, among other steps, filing your 2022 return electronically, especially if you’re expecting a refund of any amount, as mailed paper returns take much longer to process than the 21 days you might clock in with if you file digitally. (There’s a huge backlog of about seven million unprocessed paper returns right now out of the nine million total returns needing attention.)
It also recommended IRS Free File if people are looking for filing options this year, with software-guided filing for anyone making $73,000 a year or less.
Obviously, the earlier you can do your taxes, the earlier you’ll know what your financial outlook is and how you might plan for the year as a result. That’s smart no matter your situation, but it’s especially true for people who have recently gone through divorce and are navigating their changing finances.
As we routinely advise those who pay child support, if you’re making less money than you were at the time of your original decree, you can seek a modification, but you have to pay the amount specified there until you get it changed. Your tax return can be a valuable piece of evidence in making your case, but make sure you’re in contact with the Office of the Attorney General’s Child Support Decision if you are experiencing any kind of downturn.