This year’s taxpayers have many concerns about their tax refunds, including fears that they may receive a smaller-than-usual check from the IRS. From the first data from the tax agency, it turns out that there may be some justification for the fear.
The tax agency recently said the average refund is about $ 2,300, according to Feb. 11 data. Last year, the average return was about $ 2,800.
Surely there is a warning about these early data, as tens of millions of refunds have not yet been issued. This means that the typical tax refund could change and even grow as the season progresses, as taxpayers have until April 18 to file their federal returns. In 2021, the IRS received 169 million individual returns and issued 129 million refunds, according to agency data. By 2022, the IRS has issued more than 4 million refunds.
- Here’s how long it will take to receive your 2022 tax refund
The tax refund is often the biggest check of the year for a family, with people using the money to pay off debt, to bolster their savings, or to cover their daily expenses. But consumers are expressing concern about their repayments this year amid a backdrop of rising inflation and changes to the pandemic-era tax code that could affect the size of their checks.
For example, the Enhanced Child Tax Credit (CTC) expanded the amount parents receive, but half of the money was sent in monthly payments during 2021. The remaining half is $ 1,500 for older children. or $ 1,800 for younger children, can be claimed on this year’s tax returns. That’s less than the $ 2,000 families claimed in their statements in previous years for the CTC, which could result in a lower refundsay tax experts.
Consumers are “concerned that their repayment may be delayed, it may be smaller,” said Ted Rossman, a senior Bankrate industry analyst. “We were delighted to receive these advance payments from CTC last year, but this may result in a smaller refund as a result.”
According to a Bankrate survey, almost 1 in 3 taxpayers is sad that they are worried that their repayment will be lower this year compared to previous years. Approximately 1 in 4 taxpayers is concerned about their refund be delayed – It may not be surprising considering that the Treasury Department warned in January that this tax season will be a challenge, as the agency is still facing a backlog of returns from 2021.
“There are a lot of households and families that have this reimbursement, especially those at the lower end of the income spectrum, so a smaller return is certainly a concern,” said Joe Buhrmann, CFP and senior financial planning consultant at eMoney Advisor.
Of course, each taxpayer’s situation is unique, with each individual tax refund based on a number of factors, such as income, deductions, tax credits, and withholdings during the year. Because the average tax return is lower so far than the previous fiscal year, that doesn’t necessarily mean that a taxpayer’s individual check will decrease this year.
Other reasons for smaller refunds
Aside from the child tax credit, there are other reasons why some taxpayers may see lower yields this year, Buhrmann said. One is linked to the federal government’s freezing of student loan payments.
“The repayment of the student loan on pause has been very positive and the relief was pleasant, but at the time of the taxes do not cancel any interest on the student loan,” Buhrmann noted.
Under the tax law, people can deduct up to $ 2,500 in interest from student loans from their taxes. But without paying any interest, this deduction is not possible. Deductions reduce a person’s taxable income, which means that not having the tax deduction could result in a smaller tax refund.
Other taxpayers may have received unemployment benefits, and if they did not have the taxes withheld from those payments, they will have to pay when they file their taxes, which could also reduce their refunds. Other people who got a new job may not have kept enough of their paychecks and may have a surprise at tax time.
“The tax code is a bit of a black box, unless you go out and use a withholding calculator through your employer, you can really have a nasty surprise when the tax return is offered when you actually enter all the numbers,” he said. dir Buhrmann.
Where is my refund?
Most Americans should receive their refunds within 21 days of filing, according to the IRS. But there are some issues that could stop a tax refund, the agency said.
First, the IRS urges taxpayers to file the electronic filing and apply for direct filing, as this will speed up processing. (Paper returns must be hand-managed by agency staff, in addition to the amount of time it takes to process a return.)
But some tax credits could also slow down processing. People applying for the child tax credit or the income tax credit may have a longer wait due to anti-fraud measures. The IRS recently said that people who claimed these loans should see their repayments in their bank accounts before March 1st.
Taxpayers can check the status of their return to the IRS site by clicking “Where is my refund?” on the Refunds tab. Individuals will need to know their Social Security number or individual tax identification number, their return status (such as the joint declaration of marriage) and the exact amount of their return.
The IRS says people can start checking the status of their refund within 24 hours after the agency receives an electronically filed return, or four weeks after a taxpayer submits a paper return. The tool will provide information on three stages of processing: Notify the taxpayer when their return is received, when their return is approved, and when the return is sent.
Presentation in February
Bankrate found that the largest proportion of taxpayers, 44%, plans to file their taxes in February. Another 25% said they will submit the presentation in March, while an additional 16% will wait until April. The other taxpayers surveyed by Bankrate said they did not know when to file the return, or that they planned to do so after the federal deadline of April 18 this year.
Getting a refund can provide a dose of financial relief to taxpayers, but nearly a third are concerned that the money won’t go that far this year due to rising inflation, Bankrate found. Inflation is rising fastest pace in 40 years, affecting everything from groceries to gasoline. And that of Russia attack on Ukraine Fuel and other commodity prices in the U.S. are likely to rise further, experts say.
Higher costs are affecting all consumers, but middle-class households are facing the biggest pinch, a recent Wells Fargo analysis found. This is due to the fact that middle class consumers spend more on used vehicles, which have greatly increased the price, compared to wealthy households, which tend to buy new cars. Middle-class consumers also spend more on gasoline than low-income consumers, according to the study.
“Many have been affected by rising inflation, whether rent or utilities, and certainly in the grocery store,” Buhrmann said. “This refund you get is going to cost you a little if it’s smaller or if you haven’t held back enough.”
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