According to the Wall Street Journal, the IRS paid $3.3 billion in interest to taxpayers who had to wait for refunds that were delayed last year. The IRS compensates for late refunds of income tax overpayments by charging a 4.4 percent interest rate. That was the previous year.
The IRS has awarded almost 600 million refunds totaling $1.1 trillion this year. Even still, some individuals have yet to get their paychecks. Because the filer owes the IRS money, some refunds take longer than the normal 21 days.
Other filers will have to wait because they made errors or submitted refunds that were incomplete. In other circumstances, the filer bears no responsibility. The IRS has long been understaffed and overworked, and the pandemic simply added to the stress – and the delays.
Whatever the reason, a recent study from GOBankingRates finds a significant gap between the refunds expected by filers for the 2021 tax season and the refunds that have actually been received.
According to a GOBankingRates poll, 18% of people expect a tax refund of at least $1,500, but is that realistic? You bet it is in terms of averages.
The average refund for tax season 2021 is $3,304, according to the most recent IRS data. This is an increase of $350 over last year’s average return of $2,954. It’s also more than double the $1,500 minimum that many survey respondents expect to get back from the IRS this year — although a significantly larger number don’t expect to get even that much back.
While less than 20% expect a refund of $1,500 or more, another 22% expect a refund of zero to $500, and over two-fifths (38%) expect no refund at all.
Child Tax Credit, Inflation, and Other Economic Updates
All along, people have been underestimating 2021’s inflated refunds.
In March, just as tax season was coming to a close, a different GOBankingRates survey using a different methodology indicated that 56% of consumers expected refunds of at least $1,000, far less than the average payout.
However, as nothing about tax year 2021 is average, folks can be forgiven for missing the target by a hair.
To begin with, the government’s stimulus cheques did not count as taxable income for most Americans. In addition, the American Rescue Plan extended the fully refundable earned income tax credit to millions of low-income workers who are young and childless.
Furthermore, the child tax credit was increased from $2,000 to $3,600, allowing millions more people to benefit. The government paid half the credit in advance for many people, while the other half was totally refundable.
All of this increased refunds, just as credit and payment increases had increased monthly revenue during the year.
Thousands of new gig workers are learning the ropes for the first time.
The gig economy is also likely to blame for the fact that less than 20% of those polled expect a minimum refund that is still less than half of the real-world norm.
Employers deduct taxes for the IRS from their employees’ paychecks. On the other hand, side hustlers, freelancers, and other self-employed workers are responsible for their own income tax payments.
According to Forbes, the gig economy grew by 33% year over year in 2020, indicating that it was becoming the new working-class standard. In 2021, the trend continued, with Pew Research Center data revealing that 16% of Americans received money via internet gig employment.
Millions of newly indoctrinated gig workers are still figuring out how to keep track of their earnings and make approximated quarterly tax payments as required by the IRS. Self-employed people are far less likely than employees to overpay their projected taxes.
As a result, they’re less likely to receive refunds or have their refunds decreased if they work a regular job.
Many of the study’s participants were presumably gig workers who factored this into their responses.
I have yet to receive my refund for the year 2021. So, what should I do now?
Even if you filed late, you should get your refund within 21 days. Don’t worry if you’re still waiting – you’re not alone. Taxpayers in the 2020 and 2021 tax years have faced far higher refund delays than in previous years.
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According to the Government Accountability Office, the IRS’ Where’s My Refund service has seen a 71% spike in use, with 1.4 billion visits from January to mid-May 2021 alone.
If you’re still waiting, go to IRS.gov’s Where’s My Refund to get the most up-to-date information on the status of your check, according to the IRS. To determine your status, you’ll need your Social Security number, filing status, and exact refund amount.
