America’s tax refund shock: Average worker to receive 29% LESS this year from the IRS – so how much should you expect?
Millions of Americans awaiting their refund checks could be disappointed, as early data shows that average workers will receive 29 percent fewer tax refunds from the Internal Revenue Service (IRS) this year.
The average refund check through Feb. 2 is worth $1,395, according to statistics released Thursday by the IRS. This amount is significantly less compared to the $1,963 received on average last year.
Despite the noticeable reduction in the average refund so far this year, the IRS doesn’t seem concerned, noting that the average refund amount is likely to change in the coming months.
Tax season started on January 29 this year, and starting February 2, the IRS will only process returns for five days.
The 2023 filing season began on Jan. 23 last year, giving the agency an extra week to receive and issue refunds at the same time.
Despite the noticeable reduction in the average refund so far this year, the IRS doesn’t seem concerned, noting that the average refund amount is likely to change in the coming months.
The IRS said in a news release: “Given the loss of seven days in this comparison, the seasonal statistics below show a strong start to the 2024 filing season with all systems running smoothly.”
Daniel Rahill, a CPA in Chicago, said early filers may receive smaller refunds due to the fact that those who earned higher salaries in 2023 did not increase their tax withholdings accordingly.
“It will be an interesting analysis to see where the next wave of numbers comes in once we get more tax return data,” he said. USA today.
Some tax experts also suggest refunds could be much higher than last year, estimating an increase of about $300 to $400.
“Anyone whose income didn’t exceed inflation should do better. It’s not even voodoo or marketing, it’s pretty much just science,” Mark Steber, head of tax information at Jackson Hewitt, told FOX Business.
According to data from the Internal Revenue Service (IRS), the amount of rebates Americans have received has increased year over year. For the 2022 season, the average taxpayer got a refund of $3,012.
A refund is money you overpaid to the IRS through payroll deductions, which the agency has held until you file your tax return.
Rebecca Chen, reporter and CPA, told Yahoo! Finance experts warn that Americans need to change their attitude toward tax refunds
A refund is money you overpaid to the IRS through deductions from your paycheck, which the agency withholds until you file your tax return
Experts warn that while a refund may seem like a windfall, paying too much in taxes means missing out on money throughout the year.
They say it can be spent on family and friends during the holidays – or invested so it grows in value. At the same time, too much tax in advance gives the IRS an “interest-free loan.”
“Experts say we need to change our mindset about tax refunds and remind ourselves that it’s our money to begin with,” Rebecca Chen, reporter and CPA, told me. Yahoo! Finances.
“And if you have too many government deductions, it’s basically the same as giving out an interest-free loan all year round.”
This is quite a big deal, she added, because we live in a very high interest rate, high debt environment.
At its last meeting last month, the Federal Reserve kept interest rates at a 22-year high, between 5.25 and 5.5 percent, where they have been since July last year.
Some experts warn that while a refund may seem like a windfall, paying too much in taxes means missing out on money you could have used to save or invest during the year.
The amount of money Americans have received in rebates has increased year over year, according to data from the Internal Revenue Service (IRS).
This has a knock-on effect on mortgages and credit card loans. According to the report, the average credit card interest rate has risen above 24 percent Credit boom.
If you’re one of the people who sees your credit card balance increasing and high debt, Chen says, it doesn’t necessarily make sense to withhold from the government while paying such high interest.
“Reduce your deductions and use that money to pay off your high-interest credit card debt so you’ll be better off financially,” she said.
Less deducted for taxes means you have more in your paycheck each month, which you can invest or put in a high-yield savings account.
If an average $3,000 refund were placed into a high-interest account with five percent interest, it would generate $150 for the entire year.