The Internal Revenue Service (IRS) will pay $23 billion less in tax refunds this year, corresponding to returns for 2022, collected a report by The Epoch Times.
The average tax refund decreased by $297, or 9.3 percent, from $3,175 to $2,878 between tax filing seasons. The IRS collected $2.9 trillion in personal income taxes during the tax year 2022.
For the week ending April 7, 2023, the IRS issued more than 69 million returns worth a total of $198.868 million, a 9.3% decrease from the $222.344 million issued in 2022.
The IRS suggested in January that refund amounts may be lower this year. “Due to tax law changes, such as the elimination of the Advance Child Tax Credit and the absence of the Recovery Refund Credit this year to claim pandemic-related stimulus payments, many taxpayers may see a reduction in their refunds this year,” the IRS stated in a late January press release.
During the pandemic, the US government distributed three rounds of stimulus checks to American citizens.
On their 2020 tax return, individuals can still claim the missed first and second rounds of stimulus checks. On the 2021 tax return, all missed third-round stimulus checks were claimed, followed by 2022.
During the pandemic, the federal government also expanded the Child Tax Credit (CTC) program, increasing benefits per child from $2,000 to $3,600 for children under the age of 6 and from $3,000 for children between the ages of 6 and 17.
CTC and stimulus payment benefits have ended, resulting in a smaller tax refund during the filing season of 2023.
Lower tax refunds
The results of a Bankrate survey published last month and cited by a New York newspaper indicate that smaller tax refunds are problematic for Americans.
When asked how important a tax refund is to their overall financial situation, 43% of respondents said refunds are “very important,” while 32% said refunds are “somewhat important.”
71% of men and 79% of women agreed that tax dollars were essential to their financial well-being.
82% of low-income households with an annual income of less than $50,000 value the tax refund. 75% of households earning between $50,000 and $79,999 responded, while 69% of households earning between $80,000 and $99,999 responded.
34% of respondents are concerned that this year’s tax refund “will have less of an impact due to sustained high inflation and rising living expenses.” While 33% are worried that their refund will be smaller than usual, 19% are concerned that it will be delayed.
28% of respondents intend to use their tax refund to pay off debt, 26% to save, and 13% for day-to-day expenses.
Tax filing deadlines and penalties
The filing deadline for tax returns for 2022 was April 18. A six-month extension can be requested by individuals who have not filed their tax returns by the deadline. This gives them time until October 16.
“By filing a return on time or requesting an extension before the April 18 deadline, they will avoid the late-filing penalty, which can be 10 times more expensive than the penalty for not paying,” the IRS said in a release.
For amounts not paid by April 18, the IRS will assess a penalty of 0.5% of the tax due per month, up to a maximum of 25%. The penalty for late filing of tax returns is 5% per month, with a maximum of 25%.
Those who have not paid on time have the option of requesting a payment plan that allows them to pay taxes in installments.
