As of this month, the IRS tax refunds for the tax year 2023 are noticeably lower compared to the same period last year? Despite the recent commencement of tax return acceptance on January 29, there’s a concerning trend. The IRS reports a substantial decrease in both the total number of refunds and their amounts compared to last year, with a 67.3% drop in refunds and a 76.8% reduction in refund amounts year-over-year.
The recent plunge in U.S. tax refunds has thrown a curveball into the 2024 filing season, prompting questions about the reasons behind this unexpected dip. While the IRS paints a rosy picture, boasting efficient systems and a smooth start, the lower refund numbers tell a different story. This apparent contradiction begs for an explanation: what’s causing the disconnect?
The Average IRS Tax Refund You Could Expect
The IRS initiated tax return processing for the 2022 tax year on January 23, 2023, but for the current tax year, the process commenced on January 29, 2024. While one might initially attribute the observed decrease in processing days to a knee-jerk reaction, the figures tell a different story.
By this date, the number of processed returns is only down by 16.9%, and the average refund amount has experienced a notable 28.9% decline, dropping from $1,963 last year to $1,395 this year. Specifically, the average direct deposit refund has decreased by 25%, from $2,056 to $1,543. These substantial reductions suggest a genuine decrease in IRS tax refunds this year.
The question arises: Did the average U.S. taxpayer receive a significant salary increase without a corresponding adjustment in income tax withholding? Alternatively, could this be an anomaly resulting from the suspension of mandatory tax deposits for many filers affected by storms in late 2022 and early 2023?
It’s worth considering that several individuals were not obligated to resume estimated tax deposits until the beginning of this year, potentially contributing to the observed shifts in tax refund dynamics.
How Many Tax Refunds Does the IRS Expects to Process in 2024?
While the IRS anticipates a flurry of returns with nearly 130 million expected by the April 15th deadline, many taxpayers are scratching their heads over lower 2023 refunds compared to last year. Here’s what you need to know:
Don’t panic just yet. Remember, last year’s initial dip in average refunds (10.9%) eventually settled at only 2.5% lower than the prior year. This suggests the final picture might not be as bleak as it seems currently.
Changes in child tax credits and fluctuations in income compared to inflation might actually lead to an increase in refunds for some filers. So, wait before hitting the panic button and practice your patience. Some refunds, like the Additional Child Tax Credit (ACTC) and Earned Income Tax Credit (EITC), are legally delayed until next week. Once disbursed, these might significantly boost your overall refund amount.
Warning: These “Tax Refunds” Are a Scam, Don’t Be a Victim
As the season for scams reemerges, scammers are once again posing as the IRS, utilizing email and text messages to lure individuals with promises of a “tax refund” or an “e-statement” related to their refund. Despite the appearance of legitimacy, it is crucial not to click on any links.
These deceptive messages, whether delivered through email or text, typically contain a link that purportedly directs you to a form necessary for claiming your refund. Clicking on such links, however, exposes you to the risk of identity theft or the installation of malware on your device, all without your knowledge.
It’s important to note that the authentic IRS will never initiate contact through email, text messages, or social media to request your personal or financial information.
Should you receive any suspicious messages of this nature, refrain from clicking on any provided links. Instead, check the status of a pending refund on the official IRS website. No other way or channel is considered official for the authorities.