Although millions of people already have filed their taxes, according to IRS data, those who haven’t should know that the 2023 tax season is bringing some changes thanks to inflation and as most of the nation moves away from COVID emergency policies.

Those changes include a higher standard deduction and income tax brackets and a lower Child Tax Credit amount. The IRS also extended energy-related tax breaks as part of the Inflation Reduction Act (IRA), which will generally apply to tax returns filed in 2024.

Tax Day typically is April 15, but this year’s deadline got pushed to Tuesday, April 18, giving last-minute filers a couple more days. According to UNLV tax law professor Francine Lipman, Tax Day would have been on Monday because April 15 is a Saturday, but that Monday will see Washington D.C. celebrating Emancipation Day, commemorating the abolition of slavery in the nation’s capital on April 16, 1862.

People who may need more time to file their taxes can electronically fill out a request for free on the IRS website, which allows a six-month extension and moved the deadline to Oct. 16.  

“But what's important is it does not extend the time to pay your tax liability. So if you owe money, you need to pay it by April 18. If you don't, then you have interest and penalties,” Lipman said. “If you don't owe money, then you can extend and the bad news is they're not going to pay you interest on the money they owe you.”

Lipman said tax preparation services such as H&R Block or TurboTax are helpful but there are also free services provided by nonprofits such as the Nevada Free Taxes Coalition, especially for people earning less than $60,000 a year. 

“It's really important to file your tax returns and not be intimidated by it, not procrastinate and not put it off. And the early bird gets the refund faster,” Lipman said. “The IRS wants to work with you. If you have questions, give them a call. Unfortunately, you might have to be on hold for a while, though.” 

Lipman said the Taxpayer Advocate Service, an independent organization within the IRS, is another helpful resource for questions and concerns. The IRS website also has its own free online tax preparation service called Free File, which can be used by individual filers with adjusted gross income up to $73,000. 

“We're so used to doing things online and being able to do it in your living room is great,” Lipman said, adding that the quick turnaround time for refunds is also a perk to file online. “And that's another thing — taxpayers should absolutely have their refunds automatically deposited in a bank account.”

Having tax refunds directly deposited into a bank account allows taxpayers to receive the refund quicker as a check in the mail could take several weeks or could get lost, Lipman said.  

Lipman spoke with The Nevada Independent and broke down what’s new this tax season and what to keep in mind this year when it comes to the Inflation reduction Act (IRA) and clean energy incentives. The interview has been lightly edited for clarity and brevity. 

Q: What is new in the 2022 tax season?

Lipman: The great news is that we're going back to kind of the old normal. And so what is nice about this tax season — I guess good and bad — is that we don't have economic impact payments to reconcile. You don't have the Child Tax Credit that was received in advance to reconcile, you don't have significant unemployment income from being laid off — most people. 

And so it's really back to the old rules that were pre-COVID. And while there has been some news that could result in lower tax refunds, I actually think that for most taxpayers, that is not true, because the additional COVID relief was intentionally paid out in advance. And so most individuals got it well before tax season, in either monthly payments through the Child Tax Credit, or those economic impact deposits. 

What's interesting is the Child Tax Credit, which was enhanced during COVID, it went up to $3,600, and for most people that was paid monthly. That stopped at the end of 2021. So for 2022, nobody got any payments, nobody got any economic impact payments. And when you file your 2022 tax return right now — do it as soon as possible — you'll get the full $2,000 Child Tax Credit. 

So the Child Tax Credit goes back down to $2,000, regardless of what age your kid is as long as the kid is under 17. 

Is there any possibility the Child Tax Credit structure will go back to being paid monthly?

Well, I will assure you that advocates like myself, who work on behalf of low-income kids, have been pushing members of Congress to go back to that 2021 tax credit because it dramatically decreased child poverty. 

And the thing that is most heart wrenching is that the poorest group of Americans by age are the youngest Americans — under 6 years old are the poorest group. And of course, they are the individuals who really need good nutrition, good health care, good education, just exposure to learning, how to read and developing their brain. So a kid who suffers poverty, food insecurity, or other stress in their life — the stress of poverty has now become a disease. 

And it's frustrating, because we found a solution to cut child poverty. And the Internal Revenue Service was pretty impressive setting it up. Obviously, there were some glitches, but generally speaking, it got into people's bank accounts in a timely manner. And so it is frustrating that we've gone back. And right now, Congress just doesn't seem to be focusing on things like this.

Is there a new procedure to claim the Child Tax Credit when filing this season? 

No, it goes back to the way we've done it for years now. And it's right on the tax return. Also, in order to get the child tax credit, the child does have to have a Social Security number. And so kids who have ITINs (Individual Taxpayer Identification Number) do not qualify for the Child Tax Credit. They do qualify for another credit called the dependent credit, which is only $500 versus the full $2,000.

There’s also changes to the standard deduction (married filing jointly – $25,900, head of household – $19,400, single or married filing separately – $12,950). Can you elaborate more about that? And what does the increase mean for the average person?

Since the Tax Cuts and Jobs Act, which was passed into law during the Trump administration and became effective 2018, every year the standard deductions go up for inflation. And so the standard deduction amounts right now are actually pretty, pretty significant. 

Every year they're indexed for inflation. So they go up. 

People probably won't see much of a difference in their tax refund, because hopefully, their income has similarly increased by inflation. I think that the additional amounts will help offset their increased salary. And for the folks who have not gotten those increases, they might see a larger tax refund. 

A number of things get adjusted for inflation so that when your salary goes up based on inflation, you don't end up with what we call “bracket creep” — so you don't end up going into the next tax bracket just because of inflation. 

The IRS will be adding thousands of new agents, what does that mean?

They're adding agents because high income, predominantly millionaires, and probably even billionaires, have not been paying their taxes. 

Secretary of the Treasury Janet Yellen has said affirmatively that there's going to be no more audits of people with income levels below $400,000. And the audits are really targeted to people who have not been paying their taxes. And we want everyone to pay their taxes. There are people out there who are multimillionaires who don't even file and so those people need to be targeted, and they will be. 

The good news is the money that Congress allocated to the IRS is not only for enforcement, some of it is but other monies is for people to answer the phone and open the mail. During COVID, they had a backlog of something like 10 million [pieces of] unopened mail. Talk about people who don't open their mail. They had literally truckloads of unopened mail that they needed to process and so they needed to hire just clerical, technical people to manage this. 

My understanding is they hired 5,000 more people to answer the phones. So they'll answer your questions. And so that should also make processing the returns happen more quickly. Which is a good thing for everyone.

Have there also been changes in tax credits and deductions?

So generally, not so much with the deductions … other than the inflation adjustments that we talked about. As to the credits, they pretty much are back to the pre-COVID amounts — for the Child Tax Credit, we still have the American Opportunity Tax Credit for college kids’ first four years of college. 

We have the Lifetime Learning Credit for post four years of college if it takes you more than four years to get your degree or law school. My law students can qualify for the Lifetime Learning Tax Credit. There are some electric vehicle credits for 2022 but a lot of that, because of capacity, they aren't available. And so no real new tax credits for 2022. 

Starting in 2023, which we’re already in, the Inflation Reduction Act created a number of tax credits for electric vehicles. And so those are phasing in as an extension of the old credit. And one of the nice things about the expansion is it will cover used electric vehicles. Previously, used vehicles were not covered, so that's a credit of up to $4,000. 

And then on new vehicles, it can be up to $7,500. And that credit phases in over the next nine years. 

But what's cool is, starting in 2024, you're going to be able to transfer the credit to the seller of the vehicle. So what that might do is allow people to buy an electric vehicle, because it's kind of like a down payment, and I think that will open up buying opportunities for more people starting in 2024. 

The used vehicle credit starting in 2023, you have to buy it from a dealer. So I couldn't buy your used vehicle and get that credit. It has to be from a dealer. I think we're gonna see probably more dealers of electric “clean” vehicles coming up, especially in the used market.

And people can claim that on their 2023 tax return in 2024. So a year from now. 

Is there more to look forward to for the 2024 tax season from the Inflation Reduction Act?

So in addition to the Clean Vehicle Tax Credits, there are some home energy efficiency credits that are coming in. And I would encourage people, before they implement something, to go to the IRS website and really read through the details, because the IRS website actually is listing specific cars that qualify, because it is really complicated. 

A big part of the Inflation Reduction Act focus is to make sure that these cars are manufactured in the United States, as well as the batteries and everything. So they really want to bring it here. People need to make sure that they're targeting the right vehicles and that they've got good information about what they're buying and the benefits of that because it is complicated because it's not only the battery, but then certain minerals in the battery when you're really trying to focus on clean climate.

Can anyone qualify for the 2023 Inflation Reduction Act credits and deductions?

Yeah, generally speaking, it does phase out for higher income. And I saw some of the thresholds were like $300,000 for married filing jointly and above $150,000 for single, so higher-income individuals are phased out. The cars have to be used in the United States. So pretty much anyone.

What are some things that the public should be aware of to avoid being victims of scams? 

The IRS is never going to knock on your door. They're never going to call you or text message you and say, “If you don't give me your credit card and pay this amount there, we're going to come get you.” The IRS does not do that. The good news and bad news is the way the IRS communicates with you is through the mail. So one thing young people probably don't do is check the mailbox. Go to your mailbox. Because when they send you correspondence, there are due dates. 

Some of the scams are unscrupulous tax preparers. If you do go to a paid preparer, make sure you get a copy of your tax return. Make sure that the paid preparer signs the tax return. Make sure that you look at the tax return. And if you see anyone's name on your tax return that you don't recognize, some dependent that you've never heard of, then don't file a tax return. Don't sign off on that. 

If your tax refund seems incredibly high, ask questions. Push back. Or similarly, if you feel like you owe too much, ask questions, take some time and then maybe have somebody else evaluate it.

Make sure you know how much they're going to charge you before the tax return is done. You don't want to have the tax return done and then they see your large refund and charge you more. That is not how it's supposed to work. Don't fall for them giving you your refund early and charging you an excessive fee for that. 

And the other thing is, you don't shop for your tax refund. Your tax refund is what it is under law. Lastly, unfortunately, if there's an error or problem with your tax return, you — not the tax preparer — are liable. You're signing that under penalties of perjury, and just make certain you feel comfortable attesting to what information you've provided.