- IRS reports a 29% decrease in average tax refunds
- Reasons behind the lower refund amounts
- Expectations for refund sizes to increase as more returns are processed
- Important considerations for taxpayers
As the income-tax-filing season kicks into gear, the Internal Revenue Service (IRS) has released new data that reveals a concerning trend for taxpayers. The average tax refund this year is almost 29% lower compared to last year. While this may raise alarm bells for many individuals eagerly awaiting their refunds, it’s important to understand the factors contributing to this decrease and why it might not be as grim as it seems.
The Refund Picture
Processing Delays and Sample Size
One key factor to consider is the delayed start of the tax-filing season this year. The IRS began processing tax returns almost a week later than last year, resulting in a smaller sample size of returns processed. As a result, the comparison of refund sizes between years may be skewed. The IRS has received approximately 19% fewer returns this year compared to the same period last year. With more returns expected to come in, it is likely that the average refund size will increase.
Delay in Refunds for Earned-Income Tax Credit and Child Tax Credit
Another reason behind the lower average refund amounts is the delay in issuing refunds for returns claiming the earned-income tax credit or the refundable part of the child tax credit. These refunds are withheld until at least February 15th to prevent fraud. The pending bill in the Senate to increase the refundable portion of the child tax credit further adds to the delay. This means that many taxpayers who are eligible for these credits will experience a delay in receiving their refunds, thus impacting the overall average refund size.
Tax Law Changes and Individual Tax Situations
While individual tax situations vary greatly, tax-preparation experts suggest that there are no major federal-law changes for tax year 2023 that should significantly decrease refund averages. Factors such as changes in marital status, dependents, or income sources can influence the size of an individual’s return. However, experts anticipate that refund amounts in 2024 will be similar to or potentially higher than those of the previous year.
While the initial statistics from the IRS indicate a decrease in average tax refunds, it is essential not to panic. The delayed start of the tax-filing season and the withholding of refunds for certain tax credits are key factors contributing to the lower refund amounts. As more returns are processed and tax laws remain stable, it is expected that the average refund size will increase. It’s important for taxpayers to consider their own unique tax situations and consult with tax professionals for personalized advice. Keep calm and stay informed!