Inflation-hit Americans who filed their taxes early have received, on average, smaller tax refunds this year, according to data published by the IRS.
The average tax refund issued by Feb. 2 averaged $1,395, a significant decline of $568—or a drop of 29 percent—from the same time last year, the data show. So far, 2.6 million tax refunds have been issued, worth about $3.65 billion.
The IRS said that the average refund amount may change in the coming weeks and months as more returns are delivered. People who may receive the earned income tax credit, which is a break given to moderate- and low-income Americans, weren’t to begin receiving refunds until after the middle of February, the IRS noted.
The IRS stated in another news release that most earned income tax credit, also known as the child tax credit, filers will get refunds by Feb. 27 if there are no problems with their returns. The IRS said it had received about 15.3 million returns to date, roughly 19 percent less than at the same time last year.
“Because the 2023 filing season began on Jan. 23, the IRS had been receiving returns for 12 days by Feb. 3, 2023, compared to only five days for the 2024 filing season, which opened on Jan. 29,” the IRS said. “Considering the loss of seven days in this comparison, filing season statistics ... show a strong start to filing season 2024, with all systems running well.”
In all, the agency anticipates processing more than 128.7 million individual tax returns this season, with approximately three in four tax filers slated to get a refund.
Illinois-based certified accountant Daniel Rahill told USA Today that early filers might be getting smaller refunds because they haven’t increased their tax withholding amounts.
“Gig workers may have earned more income, but not stepped up their estimated tax payments, again yielding smaller refunds,” Mr. Rahill said, noting that “some filers may have reaped more investment income from a strong stock market, triggering more taxes.”
The smaller refunds could represent a blow to many Americans who use the money for their savings or to pay off debt. According to a recent survey, most Americans save their refund, pay off bills, pay off credit debt, or make other necessary payments.
“We have to change our mentality about how tax refunds are because we have to remind ourselves that it is our money to begin with,” Rebecca Chen, an accountant, told Yahoo in a recent article.
Ms. Chen said that because of inflation and higher interest rates, that’s a big deal for many Americans.
“And this is quite a big deal because we’re living in a very high-interest, high-debt environment,” she told the outlet, noting that tax overpayments are “essentially like giving [the IRS] an interest-free loan throughout the year.”
“The nature of [a] tax refund is that it’s really an overpayment that we made during the year, so the government is giving them back. And this is quite a big deal because we’re living in a very high-interest, high-debt environment.”
But some tax experts have said that refunds could be higher than last year, possibly upward of $400 higher on average.
“'For anybody whose income did not outpace inflation, they should do better. It’s not even voodoo or marketing spin, it’s pretty much just science,” said Mark Steber, chief tax information officer at Jackson Hewitt, according to Fox Business.
