The IRS has refunded approximately $172 billion to taxpayers this year, $16.4 billion less than in 2022, latest agency data.
The data indicates that this amounts to an average refund of $2,903, $360 less per person than in 2022.
IRS Predicted Smaller Tax Refunds
Given the significance of these refunds to the annual budgets of many households, these spending plans are likely to be significantly altered, according to Ted Rossman, a senior industry analyst at Bankrate.
Rossman stated, “Many people enjoy refunds.” It’s the largest windfall many families receive throughout the entire year.
75% of people who took part in a recent survey conducted by Bankrate indicated that they believe their upcoming tax refund will be very or somewhat important to their overall financial well-being. This number is up from 67% in 2022.
Due to the expiration of federal payment programs instituted during the pandemic, the Internal Revenue Service (IRS) had previously predicted that refund checks would likely be smaller in 2023. These programs included both stimulus checks and tax and credit programs related to children.
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Inflation Period
Because of this, a significant number of households may be placed in an even more precarious financial position.
Rossman states that historically, households that relied on tax refunds did one of two things with the money: either paid down debt or increased their savings. In a recent survey conducted by Bankrate, only 3% of respondents indicated that they intended to make retail purchases with their tax refunds.
Rossman said, “If refunds had been larger, there would have been some inflationary pressure,” Therefore, a slight decline may contribute to deflation.
In general, Rossman advises taxpayers to modify the amount withheld from their regular paychecks in order to increase the proportion of their annual income that they keep for themselves.
If you are receiving a tax refund, it means you overpaid income tax during the previous year, which is essentially a loan to the government without interest.
