They also fear that they might get a smaller check from the IRS. Early data from the IRS suggests that there might be some reason for this dread.
According to data from February 11, the tax agency has recently stated that the average refund is approximately $2,300. The average refund last year was approximately $2,800.
There is a caveat to this early data, as tens of thousands of refunds have yet been issued. The typical tax refund can change or grow depending on the season. Taxpayers have until April 18th to file their federal returns. According to data from the IRS, the IRS received 169,000,000 individual returns in 2021 and issued 129,000,000 refunds. The IRS has already issued over 4 million refunds in 2022.
Tax refunds are often the biggest check a family receives. People use the money to pay down their debt, increase their savings, or cover daily expenses. Consumers are worried about their refunds in the face of rising inflation and changes to tax codes during the pandemic. This could affect their checks.
The enhanced Child Tax Credit (CTC), for instance, increased the amount parents receive. However, half of the money was sent out in monthly payments between 2021 and 2021. This year, the tax returns can claim half of the remaining amount, which is $1,500 for older kids and $1,800 for younger ones. This is less than the $2,000 that families claimed in previous years for the CTC. Tax experts believe this could result in a smaller refund.
Ted Rossman, senior analyst in the industry at Bankrate, stated that consumers are concerned about whether their refund will be delayed or reduced. “We enjoyed receiving advanced CTC payments last yea, but it may result in a smaller refund.”
According to a survey by Bankrate, almost 3 out of 3 taxpayers are worried that their refund might be lower than in previous years. Around 1 in 4 taxpayers fear their refund could be delayed. This is not surprising considering that the Treasury Department warned that this tax season would be difficult as it still has to deal with a backlog in returns starting in 2021.
Joe Buhrmann, a CFP, senior financial planning consultant at eMoney Advisor, stated that “there are many households or families who depend on that refund, particularly those at the lower income spectrum. So a smaller refund can definitely be a concern.”
Every taxpayer’s situation will be different. Each tax refund is based on income, deductions and tax credits. The average tax refund for this tax year is lower than it was in the previous tax year. However, that does not necessarily mean that taxpayers will see a decrease in their individual checks.
There are other reasons that refunds may be smaller
Buhrmann stated that there are other reasons some taxpayers might see lower returns this year than the Child Tax Credit. One reason is the federal government’s ban on student loan repayments.
Buhrmann stated that “The paused student loans repayment was very positive and the relief it provided was nice, but at tax-time you can’t write off any student loan interest.”
Tax law allows people to deduct $2,500 in student loan interest from their taxes. This deduction is not possible if you don’t pay any interest. Tax deductions reduce an individual’s taxable earnings, so a smaller refund could be possible.
Others may have been eligible for unemployment assistance. If they don’t have taxes withheld, they will need to pay the taxes when they file. This could reduce their refunds. Others who have gotten a new job might not have had enough withheld from their paychecks, and they could be surprised at tax time.
Buhrmann stated that the tax code is “a bit of a blackbox — unless your employer provides a withholding calculator, it can be a real surprise when tax filing season comes around and you actually enter all the numbers.”
Where is my refund?
According to the IRS, most Americans should receive their refunds within 21 business days of filing. The IRS has stated that there are some issues that may delay a refund.
First, the IRS encourages taxpayers to file electronically. They can also request direct deposit because it will speed up processing. Paper returns are handled by agency workers manually, which increases the time it takes to process them.
Some tax credits can slow down processing. Anti-fraud measures may cause people who claim the Child Tax Credit and Earned Income Tax Credit to wait longer. People who claim these credits should receive their refunds by March 1, according to the IRS.
Click ” Where is My Refund” to check the status of your refund. Under the Refunds tab. You will need your Social Security number, Individual Taxpayer ID Number, filing status (e.g. married filing jointly), and the exact amount of your refund.
According to the IRS, taxpayers can check the status of their refund within 24 hour after an electronic return has been received by the agency. This is four weeks after a taxpayer sends in a paper return. It will inform taxpayers about three stages of processing: The first alerting them when their return has been received, the approval time and the date that the refund will be sent.
Filing February
Bankrate discovered that 44% of taxpayers plan to file taxes in February. Another 25% of taxpayers said they would file their taxes in March while 16% will wait till April. Bankrate surveyed the remaining tax payers and found that they didn’t know when or if they planned to file after the April 18 federal deadline.
Bankrate found that while a refund can offer some financial relief for taxpayers, almost three quarters of them are concerned that the money will not go as far this fiscal year because of rising inflation. Inflation is at its fastest rate in 40 years. This has a negative impact on everything, from groceries to gasoline. Experts predict that Russia’s attack against Ukraine will cause fuel prices to rise and other commodities to increase in the U.S.
All consumers are affected by higher costs, but the most severe pinch is for middle-class households, according to a Wells Fargo analysis. This is because middle-class households spend more on used cars, which have sharply increased in price, than wealthy households who tend to purchase new cars. The study also found that middle-class consumers spend more gasoline than those with lower incomes.
Buhrmann stated that rising inflation has impacted many, whether it’s rent or utility costs and most importantly at the grocery store. If the refund is smaller or you don’t withhold enough, it will sting a bit.
