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Tax experts warn of refund shock post-pandemic

Tax experts warn of refund shock post-pandemic
Posted at 3:02 PM, Mar 30, 2023

Tax Day is less than three weeks away, and if you haven’t filed your return yet, experts say you may be in for a surprise when your return comes back.

"You need to watch out for refund shock," said Mark Steber, the chief tax information officer for Jackson Hewitt Tax Services.

Steber explained that pandemic changes that made previous tax years complicated are now reverting, so a lot of the tax breaks people got before are gone.

"The child tax credit went down. The dependent care credit went down, earned income for singles went down. You no longer can take a charitable donation if you don't itemize what's gone. There's no stimulus to add on for a new dependent. So all in all, refunds are going to be a little smaller this year," Steber said.

Florida resident Carol Shantos confirmed her last couple of tax years were very complicated. So complicated, she said she was marked as deceased and still hasn’t received her full stimulus payments.

Shantos was a real estate broker for decades, but after a bad car accident, she’s now on social security and Medicaid, running three side gigs to make ends meet.

"I do a mobile notary service for a title company that I’m licensed through," she said. "I do home-sitting services for people that travel or have a second home in Florida, and I started selling items I could no longer use myself on Poshmark."

SEE MORE: Experts warn almost 80% of youth get tax advice from social media

According to the project management software company TeamStage, 36% of U.S. workers are now part of the post-pandemic “gig economy," earning 58% of what full-time employees do.

Its income that the IRS said needs to be federally taxed, but the new law passed under the American Rescue Plan of 2021 requiring people to file taxes for any transactions made through payment apps and third-party apps is postponed until next year’s tax season.

“So it really is next year, the year we're in right now. If you get more than one transaction and $600 during the year, you're going to get a 1099-K from the platform, think Zelle or PayPal; they will report to you how much money you got and they'll also tell that to the IRS.” Steber explained.

The requirements remain the same this year, meaning gig workers only have to file a 1099-K tax form if they made more than $20,000. For example, the pet-sitting app Rover sent an email to its host base stating that the new regulations are postponed and caretakers will only receive a 1099-K if they made more than $20,000 and 200 bookings.

Experts advise filing as soon as possible to ensure finances are covered and you’re not banking on the extra money that’s not coming.

This article was written by Stassy Olmos for Scripps News Tampa.