Early IRS Data Show Americans’ Tax Refunds Are Nearly 11 Percent Smaller This Year

Early IRS Data show that Americans’ tax refunds so far this year are smaller than they were last year, a phenomenon that was predicted by the agency and tax experts.

As of Feb. 3, the average refund amount stood at $1,963, or down about 10.8 percent from the year-ago period, when it was $2,201 on average, the IRS data show.

The agency’s data also show that more refunds have been given out. As of Feb. 3, 6.9 million direct deposit refunds have been reported, compared with 4.46 million for the same time period last year—a 38.7 percent increase year over year.

But, 2023 has seen more tax returns processed. The agency reports that 19 million tax returns have been processed, compared to 13 millions processed in the previous year. This is a 29 per cent increase over the year-ago period.

“I would argue that people’s tax refunds are going to be less because of the fact that they are not going to get these special pandemic provisions anymore,” Eric Bronnenkant is the chief tax officer at Betterment Telled Yahoo Finance interviewed recently “Obviously, everyone’s situation is unique, but on average refunds are going to be smaller due to less stimulus.”

Additional tax experts and IRS Those who have said it themselves Taxpayers should not expect to receive smaller returns on 2022 for the next few months. Taxes. The reason is that certain pandemic-related tax breaks and options aren’t available any longer.

“Refunds may be smaller in 2023,” Last November, the IRS issued a warning. “Taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no Economic Impact Payments for 2022. In addition, taxpayers who don’t itemize and take the standard deduction won’t be able to deduct their charitable contributions.”

The IRS has noted that for 2022’s filing season, the increased Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Credit applied. However, these credit amounts are now back to pre-pandemic levels.

As part of the federal government’s pandemic relief effort, the CTC was expanded from $2,000 per child to $3,600 for each child under the age of 6 and to $3,000 for children between the ages of 6 and 17. The American Rescue Plan made the credit completely refundable and sent half the credit to families each month for the second part of 2021. The other half could be claimed by families on their 2021 tax returns.

The Child Tax Credit is now non-refundable. However, $1,500 is still available. refundable for certain lower-income people who have child dependents.

In a Jan. 23 news release announcing the start of the filing season, the tax agency again cautioned that many taxpayers should expect a smaller refund this year due to tax law changes.

“Due to tax law changes such as the elimination of the Advance Child Tax Credit and no Recovery Rebate Credit this year to claim pandemic-related stimulus payments, many taxpayers may find their refunds somewhat lower this year,” the IRS said last month.

For those people who are eligible for a refund, it may take longer. Last year, the IRS warned that some tax returns may require extra time to process this year.

According to the IRS’s website, taxpayers should expect to receive their 2022 tax refund within about 21 days of submitting their return if they file electronically. People applying for the Earned Income Tax Credit or Additional Child Tax Credit will likely have to wait longer, the agency’s website says.

Tom Ozimek contributed to this report.

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