Our Partner Support Team is receiving many requests for assistance regarding “why are so many TY2022 refunds lower than TY2021?”. While we cannot provide tax advice, many of these reductions are the result of several popular COVID related tax breaks and enhancements, including those included as part of the 2021 American Rescue Plan (ARP), that have changed and/or expired since last tax season.

For a quick and informative overview, we strongly encourage our partners to review the “What’s New” listing located on Pages 1 & 2 of IRS Publication 17 – Tax Guide for Individuals TY2022, along with Reminders on Page 3. We know that this is a very busy time for tax professionals, but taking time now to familiarize yourself with these changes, will help you to better understand and explain the changes impacting some of the clients you serve.

Note: Some of the changes reverted refundable tax credits to a non-refundable classification for TY2022. Here’s a reminder of the difference between the two:

• Both refundable and nonrefundable credits are subtracted from the taxes owed. If a refundable credit (e.g. EITC) exceeds the amount of taxes owed, the difference is paid as a refund. If a nonrefundable credit (e.g. Child Dependent Care) exceeds the amount of taxes owed, the excess is lost.

Noteworthy What’s New for TY2022 items include:

• Child Tax Credit and Additional Child Tax Credit – The many changes to the child tax credit (CTC) implemented by ARP were not extended and enhancements have expired
• Credits for Sick and Family Leave for certain self-employed individuals was not extended and are no longer available
• Credit for Child and Dependent Care Expenses – changes to the credit for child and dependent care expenses implemented by (ARP) were not extended.
• Earned Income Credit (EIC) – The enhancements for taxpayers without a qualifying child implemented by ARP don’t apply for 2022
• Health Coverage Tax Credit – was not extended
• Tuition and Fees deduction is not included on the IRS TY2022 What’s New list but is generating calls. This deduction, which may have used for the 2019 or 2020 tax year, was repealed for 2021 and later years. That doesn’t mean taxpayers will be unable to deduct qualified education expenses  – they can do so by claiming the American Opportunity Tax Credit, or the Lifetime Learning Tax Credit. Refer to IRS Publication 970.

Other Changes to Tax Scenarios included on the IRS What’s New listing:

• Standard Deduction Amount Increased
• Standard Mileage Rate Changes
• Reporting Requirements for Form 1099-K
• Bona Fide Residents of Puerto Rico – enhanced Additional Child Tax Credit eligibility
• Adoption Credit
• IRA Contributions
• Alternative Minimum Tax (AMT)

Many of these changes were also covered as part of our Federal Tax Law Update for TY2022 and a recording is available on your Resource Center > Webinars Page, along with the presentation slide deck handout.  

We hope you’ll take advantage of these helpful resource recommendations. If you have any questions or require further assistance, please contact the Partner Support Team at 206-209-2653 or email us at help@erosupport.com.

Thank you, 

Your Partner Support Team