With only six weeks left until the April 18th federal deadline, and a large number of taxpayers still needing to submit their annual returns to the IRS, the clock is ticking down for tax season. The initial tax returns that have been filed with the IRS are giving us some indications of what we can anticipate this year, such as the time it takes for processing and the amount of refund you might receive.
Based on the most recent available data, approximately 168 million households or individuals are expected to file their taxes this year, which means that roughly 7 out of 10 taxpayers will be submitting their returns to the IRS in the coming weeks. For those who still need to file, here is some information to keep in mind, based on advice from tax experts and IRS data.
It is expected that your tax refund will be approximately 10% less
Before the start of this year’s tax season, both tax experts and the IRS had cautioned that refunds were expected to be lower due to the end of pandemic-related benefits such as the expanded Child Tax Credit and stimulus checks. With several weeks of data now available, as tax filing began on January 23rd, the initial results indicate that tax refunds are down by an average of 10% this year.
Based on IRS data, the average tax refund for 2023 is currently around $3,170, which is lower compared to last year’s average refund of $3,529 at the same time. In the past three tax seasons, pandemic-related issues caused significant delays, resulting in millions of tax returns being held up in the IRS system, leading to delayed refunds and financial stress for many taxpayers. However, both IRS data and tax experts suggest that tax returns are being processed more quickly this year.
Tax returns are being processed more quickly this year
As of February 24, the most recent available data, the IRS had received roughly 46 million tax returns, a 1.3% increase from last year, and processed 45.7 million of them, representing a 4.3% increase from the previous year. The IRS has hired additional agents and customer service representatives, which has reportedly helped to alleviate some of the problems experienced in earlier years.
According to Keith Hall, a certified public accountant and CEO of the National Association for the Self-Employed, a group that represents small business owners, the response time and customer service have been better this year. He stated that the IRS has significantly improved their service compared to previous years.
Although pandemic-related benefits such as stimulus checks and the expanded Child Tax Credit have mostly expired, there are still several deductions and credits available that taxpayers should not overlook. For example, the Child Tax Credit remains available, but at its pre-pandemic maximum amount of up to $2,000 for each child under the age of 17.
Additionally, parents who qualify and have older children in college can claim education-related tax benefits such as the American Opportunity Tax Credit and the Lifetime Learning Credit, although only one per child is allowed. The former can be worth up to $2,500, while the latter can be worth up to $2,000.
Low- to middle-income taxpayers who qualify may be eligible for up to $6,935 in tax credits through the Earned Income Tax Credit
In addition, individuals who earn income from side gigs or freelance work should not forget to claim deductions for their business-related expenses, according to Keith Hall from the National Association for the Self-Employed. Deductions for expenses like a new computer, office furniture, and other purchases can usually be found in one’s checkbook. However, expenses such as using a personal vehicle for business purposes can be easily overlooked.
If you need more time to prepare your tax forms, you can request an extension from the IRS that grants an additional six months to file, moving the deadline to October 17. However, it’s important to note that an extension only applies to filing your return and does not extend the deadline for paying any taxes owed.
Keith Hall, CEO of the National Association for the Self-Employed, emphasized that if you anticipate owing taxes to the IRS, you should make a payment along with your extension request to avoid penalties and fees. By making a quick estimate of what you owe and sending in a payment, you can take advantage of the extension without facing additional financial consequences.