The Impact of Lower Tax Refunds on American Households
According to a recent Bankrate.com report, 69% of Americans who anticipate getting a federal tax refund this year have some anxiety regarding their tax returns. The primary anxiety expressed is that their refund will be diminished in effect due to increasing prices, as well as fears that the refund amount will be less than normal or late in arriving. Without an IRS amendment to the lookback period, taxpayers who took advantage of the 2021 pandemic filing postponement would be prevented from receiving refunds to which they are entitled if they didn’t file by Monday, Apr. 15, 2024.
The IRS sends the vast majority of refunds within less than 21 calendar days. Tax experts cautioned that filing taxes on paper would result in a slower refund, as the IRS systems are not equipped to process them quickly. There are not sufficient facilities to accomplish this. The Internal Revenue Service has confirmed that individuals who filed paper returns for their taxes may experience a delay of up to 6 months for the receipt of their tax refunds. The ‘Where's My Refund?' site allows those who e-filed to check the status of their return 24 hours after it was submitted.
Data from the IRS in the early stages have caused taxpayers to be worried. As of February 11th, the Internal Revenue Service has processed in excess of 26 million tax returns, with the average refund amounting to $1,997. This is 14 percent lower compared to the same period last year. However, this figure is likely to vary as the season progresses and more taxpayers submit their returns. IRS data showed that the average tax refund last year was nearly $3,300, which was a 14 percent increase from 2021. Tax experts predict that the amount received will likely return to levels seen in previous years. In 2021, the average refund was approximately $2,800 and in 2020 it was approximately $2,600
Results from the survey indicated that households with lower incomes deem their tax refund to be essential to their financial situation. Generations of more mature age that are expecting reimbursements are likely to put the money towards debt reduction rather than the younger generations. 84% of Millennials say the refund they expect this year is important, a larger proportion than 80% of Gen Zers and 75% of Gen Xers, making them more dependent on the windfall than any other generation. A mere 63 percent of baby boomers who anticipate a refund this year believe it is significant to their financial situation.
Bankrate's Senior Industry Analyst, Ted Rossman.
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