New IRS features allows taxpayers electronically filing amended returns to choose direct deposit to speed refunds

WASHINGTON — In the latest improvement for taxpayers, the Internal Revenue Service announced today that people electronically filing their Form 1040-X, Amended U.S Individual Income Tax Return, will for the first time be able to select direct deposit for any resulting refund.

Previously, taxpayers who filed Form 1040-X with the IRS had to wait for a paper check for any refund, a step that added time onto the amended return process. Now, anyone who electronically files the Form 1040-X can select direct deposit and enter their banking or financial institution information for quicker delivery of refunds. Taxpayers file a total of approximately 3 million amended returns each year.

"This is a big win for taxpayers and another achievement as we transform the IRS to improve taxpayer experiences," said IRS Acting Commissioner Doug O’Donnell. "This important update will cut refund time and reduce inconvenience for people who file amended returns. We always encourage direct deposit whenever possible. Getting tax refunds into taxpayers’ hands quickly without worry of a lost or stolen paper check just makes sense.”

The IRS began accepting the Form 1040-X electronically in 2020 but until now did not offer direct deposit as an option for a refund. Following IRS system updates, those filing amended returns can now enjoy the same speed and security of direct deposit as those filing an original Form 1040 tax return. Taxpayers filing an original tax return using tax preparation software can file an electronic Form 1040-X if the software manufacturer offers that service.

This is the latest step the IRS is taking to improve service this tax filing season. As part of funding for the Inflation Reduction Act, the IRS has hired more than 5,000 new telephone assistors and is adding staff to IRS Taxpayer Assistance Centers (TACs). The IRS also plans special service hours at dozens of TACS across the country on four Saturdays between February and May.

No matter how a taxpayer files the amended return, they can still use the "Where's My Amended Return?" online tool to check the status.

Taxpayers still have the option to submit a paper version of the Form 1040-X and receive a paper check. They should follow the instructions for preparing and submitting the paper form. Direct deposit is not available on amended returns submitted on paper.

Current processing time is more than 20 weeks for both paper and electronically filed amended returns, as processing an amended return remains a manual process even if it’s filed electronically. However, filing electronically cuts out the mail time, and including direct deposit information on an electronically submitted form provides a convenient and secure way to receive refunds faster.

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Earned Income Tax Credit

The minimum age to collect EITC for a taxpayer without a qualifying child is 25 which is the same as pre-2021 rules.

A taxpayer without a qualifying child must be under age 65 to claim EITC which is the same as pre-2021 rules.

Taxpayers claiming EITC in 2022 no longer have the op-tion to use a prior year’s earned income to calculate the credit. Taxpayers must use their 2022 earned income to claim the credit.

The maximum investment income that a taxpayer can receive and still collect EITC is $10,300 which will be ad-justed in future years for inflation.

The maximum amount of EITC for a single taxpayer with-out children is $560 in 2022 This is a significantly lower amount than 2021.

The maximum income for a single filer without a qualifying child is $16,480.

Taxpayers filing MFS that are separated from their spouse and living apart for the last six months of the year may be eligible for EITC if they have a qualifying child that lived with them for at least six months out of the year.

Child Tax Credit

Child Tax Credit is $2,000 for each qualifying child under age 17 that is claimed as a dependent on the tax return. In 2022, a qualifying dependent age 17 is not eligible for the CTC.

The refundable portion of the Child Tax Credit

(Additional Child Tax Credit) is up to $1,500 for each qualifying child. The refundable amount has been in-creased over the 2020 amount because the refundable portion of the CTC is adjusted based on changes in the C-CPI-U Index. The total amount of the CTC ($2,000) is not adjusted based on changes to the C-CPI-U Index.

To receive the Additional Child Tax Credit the taxpayer must have earned income. This is the same calculation that existed in 2020.

The refundable amount is calculated on Schedule 8812 and it is limited to 15% of the earned income on the re-turn over $2,500.

Child Tax Credit is phased out if the Taxpayer’s Adjusted Gross Income is more than the following:

· $400,000 for MFJ

· $200,000 for all other statuses

For taxpayers with AGI above the threshold amounts, the credit is reduced by an amount equal to 5% for each $1,000 of income or part thereof that exceeds the limits

Child and Dependent Care Credit

Child and Dependent Care Credit is again a nonrefundable credit and then limitations on the credit return to 2020 provisions.

Child care or dependent care expenses are subject in 2022 to the following limits:

• $3,000 for one qualifying individual

• $6,000 for more than one qualifying individual

The credit is again a percentage of the eligible child care expenses and that percentage is based on the Taxpayer’s Adjusted Gross Income.

The maximum credit in 2022 is 35% of eligible expenses for Taxpayers with AGI of up to $15,000.

Once AGI is above $15,000, the credit is reduced by an amount equal to 1% for each $2,000 of income or part thereof that exceeds $15,000 until AGI reaches $43,000. Above $43,000 the credit is 20% of the eligible expenses and there is no maximum AGI limitation.

Based on expense and AGI limitations, the maximum nonrefundable credit that a Taxpayer can claim in 2022 is the following:

• $1,050 for one qualifying individual ($3,000 x 35%)

• $2,100 for more than one qualifying individual ($6,000 x 35%)

Qualified Cancelled Mortgage Debt—This income exclusion is reported on Form 982.

Meals Deduction—Taxpayers can continue to deduct 100% of the cost of business meals that were purchased from a restaurant or are food deliveries from a restau-rant or catering service. This provision expires in 2022

Premium Tax Credit—Taxpayers with Household In-come (HI) between 100% and 150% of the Federal Pov-erty Level (FPL) for their family size are eligible for zero-premium coverage depending on the plan selected.

Taxpayers with Household Income (HI) over 400% of the FPL will contribute 8.5% of their HI towards their health coverage purchased through the Federal Marketplace or State Exchanges. The enhanced Premium Tax Credit for taxpayer that received unemployment no longer apply

Educator Expense Deduction—Secondary and elementary educators are allowed an adjustment to income of S300. Married educators are each eligible for the de-duction for a total of $600.

Form 8885—Health Coverage Tax Credit—The Health Coverage Tax Credit expired at the end of 2021. The HCTC cannot be claimed for coverage months begin-ning in 2022 unless Congress extends this provision.

Form 8885 is no longer available for use in 2022.

Private Mortgage Insurance Deduction (PMI)—The deduction for PMI expired at the end of 2021 and will not be allowed in 2022 unless Congress extends this deduction

Tuition and Fees Deduction—The Tuition and Fees Deduction was eliminated in 2021 and is no longer avail-able for use in 2022

Business Tax Extenders—These business related tax provisions expired at the end of 2021 and will not be allowed in 2022 unless Congress extends these provi-sions.

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The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
• 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.

These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 2023-03PDF contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

 The Internal Revenue Service kicked off the 2023 tax filing season with a focus on improving service and a reminder to taxpayers to file electronically with direct deposit to speed refunds and avoid delays.

Following a successful opening of its systems today, the IRS is now accepting and processing 2022 tax returns. Most of the individual tax returns for the 2022 tax year are expected to be filed before the April 18 tax deadline.

Taxpayers have until April 18 to file their taxes this year, but some taxpayers living overseas and disaster victims may have later filing deadlines. Alabama, California and Georgia storm victims now have until May 15 to file various federal individual and business tax returns and make tax payments.

"Following months of hard work, we successfully opened our processing systems today to start this year’s tax season,” said IRS Acting Commissioner Doug O’Donnell. “Getting to this point is a monumental effort not only for the IRS but also for the nation’s tax community. The hard-working employees of the IRS look forward to serving taxpayers this filing season, and I personally want to thank them, and all of the tax and payroll community for their dedication to making tax time smoother for the nation.”

O’Donnell also noted that taxpayers can count on IRS delivering improved service this filing season. As part of the August passage of the Inflation Reduction Act, the IRS has more than 5,000 new telephone assistors and added more in-person staff to help taxpayers.

“We continue to increase IRS staffing to help provide taxpayers with the information and assistance they need,” said O’Donnell. “The IRS reminds taxpayers to take some important steps when filing their tax returns for a smoother process. They should gather their necessary tax records, file an accurate return electronically and choose direct deposit to get their refunds faster.”

Taxpayers who electronically file a tax return with no issues and choose direct deposit should still receive their refund within 21 days of the date they file – similar to previous years. Due to tax law changes such as the elimination of the Advance Child Tax Credit and no Recovery Rebate Credit this year to claim pandemic-related stimulus payments, many taxpayers may find their refunds somewhat lower this year.

IRS tips for a smooth filing season

Fastest refunds by e-filing, avoiding paper returns: To avoid refund delays, IRS encourages taxpayers to file their tax return electronically with direct deposit instead of submitting a paper tax return. Taxpayers may use IRS Free File on IRS.gov, other tax software or a trusted tax professional. Members of the armed forces and qualifying veterans can file their federal tax return and up to three state tax returns for free electronically using MilTax, a Department of Defense program.

Avoid delays; file an accurate tax return: Taxpayers should make sure they're ready to file an accurate and complete tax return. This can help avoid processing delays, extensive refund delays and later IRS notices.

Earned Income Tax Credit or Additional Child Tax Credit refunds: Taxpayers may file their returns beginning Jan. 23, but the IRS cannot issue refunds involving the Earned Income Tax Credit or Additional Child Tax Credit before mid-February. The law provides the extra time to help the IRS prevent fraudulent refunds. “Where’s My Refund?” on IRS.gov should show an updated status by Feb. 18 for most EITC and ACTC filers. The IRS expects most of these refunds to be available in taxpayer bank accounts or debit cards by Feb. 28 if people chose direct deposit and there are no other issues with their tax return.

Avoid phone delays; online resources best option for help: IRS.gov is the quickest and easiest option for help. IRS assisted phone lines continue to receive a high volume of calls. To avoid delays, check IRS.gov first for refund information and answers to tax questions. Setting up an Online Account on IRS.gov can also help taxpayers get information quickly. IRS Online Account was recently expanded to allow more people to gain access. The Interactive Tax Assistant can also help taxpayers get answers to many tax questions online at any time.

Online options for free help; answers to common questions: Use IRS.gov to get answers to tax questions, check a refund status or pay taxes. No wait time or appointment needed — online tools and resources are available 24 hours a day.

Other free options for help: IRS Free File is available to any person or family who earned $73,000 or less in 2022. For taxpayers who are comfortable completing their own tax forms, Free File Fillable Forms may be a good option. MilTax is a free tax resource available to the military community, and it’s offered through the Department of Defense. Qualified taxpayers can also find free one-on-one tax preparation help nationwide through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs.

2021 tax returns still being processed: Taxpayers can check Where’s My Amended Return? to find out the status of their tax year 2021 Form 1040-X and can still file their 2022 tax returns even if their 2021 tax returns haven’t been processed. Visit the IRS Operations page for more information on what to expect.

April 18 tax deadline: This year, the filing deadline is April 18 for most taxpayers, but automatic six-month extensions of time to file are available for anyone for free. See Extension of Time to File Your Tax Return for instructions. Taxpayers should be aware that filing Form 4868 only extends the time to file tax returns. Those who owe taxes should still pay by April 18 to avoid late payment penalties.