Based on preliminary IRS data, this tax season’s average tax refund is nearly 29% less, But Avoid getting anxious just yet

New data from the tax authority indicates that, on average, the IRS is writing smaller refund checks at the beginning of this year’s income-tax filing season.

Based on data issued by the Internal Revenue Service on Friday, the average amount of federal income-tax refunds for the filing season that began less than two weeks ago is $1,395.

When compared to the initial set of statistics regarding the income taxes of the previous year, that represents an almost 29% annual decline in the average refund amount.

But taxpayers, please just relax. The refund situation is not as dire as it would appear for a number of reasons.

First, compared to last year, the IRS started processing tax returns a little later this year. The IRS hasn’t processed as many returns as it had at this point last year, as the filing season began on January 29 as opposed to January 23 last year. The comparison of refund sizes is skewed by that.

The IRS noted in a comment regarding the Friday results, “Considering the loss of 7 days in this comparison, filing season statistics… show a strong start to filing season 2024, with all systems running well.”

Thus far, the IRS has received 15.3 million returns, which is about 19% less than the first wave of data from the previous year. You should probably expect that the average 2024 refund amount will rise as more returns are received.

Early in the tax season of the previous year, the average refund was over 11% less than it was the year before. However, at season’s end, the average refund had decreased by 2.6% to $3,167.

The deadline for filing a return, paying any taxes owed, and requesting an extension is April 15, even though this year’s start date is a little later than usual.

Refund sizes should be relaxed for another reason: the IRS is unable to disburse certain refunds until at least February 15th, which contributes to the comparatively smaller averages that were announced on Friday.

Refunds in returns claiming the earned-income tax credit or the refundable portion of the child tax credit are withheld until February 15 in accordance with the Protect Americans from Tax Hikes Act of 2015. The purpose of the delay is to prevent fraud.

Up to $2,000 is awarded per child under the child tax credit, of which $1,600 can be converted into refund money at this time. The refundable amount on tax returns filed this year will increase to $1,800 according to a bill that is currently in the Senate.

Naturally, every individual’s tax situation is unique. Changes like having a child, getting married, or getting a new source of income might have tax ramifications.

The third justification for refund assurance enters the picture at this point.

Indeed, those modifications may have an impact on how much a person gets back. However, in general, tax preparation specialists state that no changes to federal law for the 2023 tax year should result in refund averages being lower than they were for the previous year.

According to Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals, the Friday IRS data are based on a small sample size.

According to O’Saben, “I would expect things to be very much equal, barring any changes from Congress” with regard to refund amounts in 2023 compared to 2024. He pointed out that if anything, adjustments to the child tax credit would result in higher average refunds.

Another bright spot is that a person’s refund might be increased and their tax bill reduced if their 2023 income does not keep up with inflation rates.

The inflation-indexed portions of the tax code saw a 7% increase on the tax returns filed by the newly united Americans. Certain essential components of a return, such the standard deduction and the income limits for tax brackets, are among the elements that are being adjusted.

After all of this year’s filings are finalized, average refunds this year might really be 5% to 10% higher, according to the chief tax information officer at tax preparation firm Jackson Hewitt.

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