Early IRS Data Shows Average Tax Refund Down 29% This Season

📝 SUMMARY: The start of the 2024 tax season has brought with it a notable decrease in the average tax refund, according to early IRS figures. More than 2.6 million refunds amounting to approximately $3.65 billion have been issued as of February 2, resulting in an average refund of $1,395—almost 29% lower than the $1,963 average refund at the same time last year. However, this year's data represents only the first five days of the tax season, a shorter period compared to the 12 days accounted for in the previous year's early data. Experts, including Jackson Hewitt's chief tax information officer Mark Steber, urge caution in interpreting these figures as indicative of the entire season, highlighting the preliminary nature of the data.

The IRS and tax professionals emphasize that early filers, especially those eligible for the earned income tax credit and child tax credit, traditionally have not yet filed. Refunds for these credits are delayed until February 27 by law, potentially skewing early average refund figures. Furthermore, adjustments for inflation and changes in tax brackets and deductions could result in larger refunds for many taxpayers, particularly if their incomes did not keep pace with inflation in 2023.

Despite the potential for pending tax legislation in Congress that could retroactively enhance the child tax credit for 2023, the IRS encourages taxpayers to file when ready rather than waiting for legislative changes. This advice comes amid reports that nearly half of taxpayers plan to delay filing until March or later, often due to the perceived complexity and stress of tax filing.

Overall, while the initial drop in average refunds may cause concern, there remains a strong possibility for adjustments that could lead to "healthy" refunds as the tax season progresses.

🔍 SOURCE: https://www.cnbc.com/2024/02/12/the-average-tax-refund-is-almost-29percent-lower-this-tax-season-irs-reports.html