Tax refunds are smaller this year compared to last, says the IRS. As of February 2, the average refund is $1,395, down 29% from $1,963.
This decrease is based on 2.6 million refunds totaling $3.65 billion. The IRS notes these early figures may change as more returns are processed.
Refunds for those with earned income or child tax credits are delayed until mid-February. This delay could be skewing current refund averages.
Smaller refunds worry many Americans, especially with ongoing inflation affecting costs of living. Tax refunds often go towards major expenses, savings, or debt repayment.
Last year, three-quarters of filers got a refund, averaging $3,176. This year's refunds might increase, with some experts predicting up to 10% more due to inflation adjustments.
Mark Steber of Jackson Hewitt says, "For anybody whose income did not outpace inflation, they should do better."
Inflation has led to larger standard deductions and tax bracket adjustments. For 2023, tax brackets increased by 7.1%, outpacing the median wage increase.
Taxpayers have until April 15 to file returns or request an extension. The IRS aims to issue refunds within 21 days for those filing electronically and choosing direct deposit.
Some returns may need more review, especially if errors or fraud are suspected. Eric Bronnenkant of Betterment advises filing early to use your refund sooner, as the IRS doesn't pay interest on refunds.