Tax season has historically been a period of expectation for many American taxpayers, with the majority receiving refunds. Not so this time around.
According to the latest figures from the IRS, the incidence of tax refunds has decreased. The number of taxpayers receiving refunds this year has fallen by 3.3%.
It is not an isolated occurrence. The past three years have shown a consistent decline.
“Two of every three taxpayers that are going to file by [Monday’s] deadline are actually owed a refund — and so it’s in your interest to get your taxes done,” IRS Commissioner Danny Werfel said in an interview with CNBC. “We’re going to pay you.”
But every year, fewer Americans get refunds. Before the pandemic, an estimated 75% of those filing taxes received a refund, Politico reported. That proportion has now dwindled to about 65%.
In absolute numbers, the IRS gave out fewer refunds last year — 105 million — compared to the number distributed in 2010, which occurred although 20 million more returns were processed.
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While the number of refunds diminishes, the average refund amount has not shown corresponding fluctuation. This year, taxpayers who received a refund averaged $3,011, an increase from the previous year.
The root cause of the gradual reduction is not clear. Some speculate that alterations in employment patterns may contribute to the trend, while others cite changes in the government’s withholding computation as a possible factor.
The falling rate of tax refunds could affect compliance with tax laws — raising concerns among tax professionals. The predictable nature of refund distribution in the pre-pandemic era appears to be shifting, presenting a new landscape for taxpayers.
Concurrently, there is a surge in the number of people who owe taxes at year’s end. Last year, nearly 40 million filers had a balance due, marking a significant increase compared to pre-pandemic figures.
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