As tax season gets into full swing, the IRS has reported issuing over 2.6 million refunds amounting to approximately $3.65 billion as of February 2nd. However, compared to last year, the average refund size has decreased by around 29%, currently standing at $1,395 instead of the previous $1,963. It’s important to note that these statistics only cover the first five days of the 2024 tax season, whereas last year’s average refund calculation was based on twelve days. The IRS has cautioned against placing too much significance on this preliminary data, as it provides only a limited view of the entire year or the three and a half months of the tax season.
A Delayed Start for Early Filers
Many early filers, such as recipients of the earned income tax credit and the child tax credit, have yet to file. By law, filers claiming the refundable portion of these credits will not receive their refunds until at least February 27th according to the IRS. Typically, individuals receive a tax refund when they have overpaid their taxes throughout the year. However, if they failed to pay enough last year, they may owe money instead. This year, due to IRS inflation adjustments, individuals whose income did not keep up with inflation in 2023 could potentially see larger refunds, thanks to higher federal tax brackets, increased standard deductions, and more.
Despite the initial decrease in average refund size, experts such as Mark Steber, the Chief Tax Information Officer at Jackson Hewitt, predict that refunds will still be “healthy” this year. Steber attributes this to higher inflation rates and expects to see bigger refunds as a result. Additionally, pending tax legislation in Congress might provide a retroactive boost to the child tax credit for the year 2023, potentially increasing refunds for eligible filers. It’s crucial, however, that taxpayers don’t wait for these possible changes. The IRS urges and encourages individuals to file as soon as they are prepared and not to delay their tax filings in anticipation of Congress making adjustments.
Interestingly, a January survey conducted by IPX1031, an investment property exchange service, revealed that nearly half of taxpayers plan to file their taxes in March or later. Complexity and stress emerged as the top reasons for this delay. While tax filings can indeed be complicated, waiting until the last minute may lead to additional stress and mistakes. Therefore, it is advisable for taxpayers to begin the process as soon as they have gathered the necessary information and are ready to file.
Despite the early figures suggesting smaller average tax refunds compared to last year, it is crucial to bear in mind the limited scope of this data. With many early filers yet to submit their returns and potential retrospective benefits on the horizon, a comprehensive analysis of the 2024 filing season requires patience and a broader perspective. Whether anticipating a refund or preparing to pay, it’s wise for taxpayers to approach their tax filings with careful consideration and avoid unnecessary delays that may hinder the process.
Leave a Reply