Your tax refund may be smaller this year
You now have just under two weeks left to file your taxes: April 18 is the deadline. (That is, unless you live in one of a handful of states where the deadline’s been extended because of recent severe weather.)
If you’re expecting a refund, there’s a good chance it’ll be smaller this year. So far, the average refund is about 10% less than it was last year, according to the IRS. That works out to about $400 per refund.
There probably aren’t too many people who love tax season. Maybe just Mark Steber.
“It’s a very exciting time,” he said. It makes sense though — he’s the chief tax information officer at Jackson Hewitt Tax Service.
This year may be admittedly a little less exciting though.
“This year has been quite an anomalous year for many taxpayers,” he said.
That’s because of those smaller returns. While the smaller amount doesn’t come as a surprise to Steber or anyone in the tax world, it has been for a lot of people filing.
“Most taxpayers are pretty short-memoried,” Steber said. “They think this year’s tax return will look a lot like last year’s, and that’s the bar. So when it doesn’t, they get very concerned and very surprised.”
There is one main reason refunds are notably smaller this year: “Largely because temporary pandemic relief has dropped out of the tax code,” said Erica York at the nonprofit Tax Foundation.
Last year, she said a lot of people received extra money in their refunds from the child tax credit and the earned income tax credit, both of which were temporarily expanded to help people through the pandemic. Some taxpayers also got stimulus payments they’d previously missed out on. This year, there’s none of that.
“It’s a pretty big change, especially for lower-income families,” York said.
The expansion of the child tax credit alone increased the income of the poorest families by about 10%, she added.
And for many low- and middle-income families, “their tax refund is the largest single payment they receive all year,” York said. “It can represent a pretty big share of their total annual income.”
So when the size of that refund changes — especially unexpectedly — York said it can have a big effect on people’s budgets.
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