Just when Americans could use some extra cash, the average tax refund this tax season tops $3,400 — here’s why

According to data from the Internal Revenue Service, the average refund is significantly higher this year.

Of the 53 million individual tax returns the IRS has processed as of March 5, it says it has issued refunds for nearly 38 million Statistics released Friday. That’s over 5% more refunds issued compared to the same point in the last enrollment season.

The average refund size this year — at least so far — is $3,401. That’s a 13.7% increase over the average refund of $2,990 issued at the same time last year.

Of course, early numbers can’t predict where reimbursement amounts will end up. As of early December 2021, the average refund was $2,815.

The IRS expects more than 160 million individual tax returns this year. The tax office has thus processed around a third of all reports expected for the 2022 submission season.

The question is whether this trend can continue for the next two-thirds of returns — which families, sure to file, are hoping for.

What explains the numbers?

According to Elaine Maag, a senior fellow at the Tax Policy Center, it’s difficult to attribute the results so far to one factor. She points to provisions like the Child and Dependent Care Credit, the Child Tax Credit and the Earned Income Tax Credit, all of which were more generous for 2021.

Those are “the big three,” said Mark Steber, Jackson Hewitt’s chief tax information officer, who expects higher reimbursements this year. “I’ll be very surprised if the refunds go down a lot more than they are,” he said.

There’s still a lot of fiscal season left, meaning the uptrend could be fading, Maag warned. Tax season ends on April 18 in most locations (and April 19 for Maine and Massachusetts residents). For now, here’s what’s going on:

The Child and Dependent Care Credit, Child Tax Credit and Earned Income Tax Credit were all more generous in 2021.

the Credit for child care and dependency was much more generous for 2021. This is the tax credit on the books to help families meet their childcare costs while they work or go to work.

Federal lawmakers upgraded the loan as part of America’s March 2021 bailout plan. For just one year, the maximum payout for a household with a single child or eligible dependent increased from $1,050 to $4,000. For families with two or more eligible children/adult dependents, the payout increased from $2,100 to $8,000.

Legislators have increased the income limits and percentage of care costs that qualify for loan disbursement.

The loan also became fully repayable for the first time, opening up the loan to lower-income families, Maag said. “However, it’s a relatively small group of people who benefit from the CDCTC (about 14% of all families with children), so it’s not a big factor. This could benefit people across the income spectrum.”

Speaking of kids, another possible contributor is the child allowance.

During America’s bailout, lawmakers increased the loan from $2,000 to $3,600 for children under 6 years old. For children ages 6 to 17, it was $3,000. Half of the sum went to families who had not canceled the advance payment.

Many families who received advance payments from the expanded loan from July through December will now receive smaller lump sums from the loan, practitioners noted — and potentially smaller refunds overall.

However, families with young children really reap the rewards of credit, Steber noted. They will receive the increased payment in a lump sum, plus a $1,400 refund credit for their child’s stimulus check they did not receive in 2021.

That’s exactly $5,000, which can quickly drag averages up, he said.

The Child Tax Credit, like the Child and Dependent Care Credit, became fully refundable for 2021.

When the IRS determined the payout amounts for the child tax credit, it looked at tax returns from 2020 or 2019. if they weren’t there. If the child wasn’t born yet, the 2021 tax return was the first time the IRS found out about the baby and activated the taxpayer money her household was entitled to.

Although the IRS’s updated tools related to child tax credit payments allowed people to update information like their bank account and mailing address, it didn’t give people the ability to report a new child in the household, Maag and said star.

The Child Tax Credit, like the Child and Dependent Care Credit, became fully refundable for 2021. Prior to that, the loan was partially refundable and was disbursed at $1,400 before income tax liabilities unlocked access to the remaining $600.

That’s another possible explanation. Full refund eligibility means families who could once get $1,400 can now get $1,500 or $1,800 in upfront payments and still get a larger refund lump sum compared to previous years, Maag said. “There used to be about 27 million kids who didn’t get the full value of the CTC because their parents didn’t make enough.”

The Earned Income Tax Credit also increased noticeably in 2021 for a subset of recipients.

the Earned Income Tax Credit Also noticeably increased in 2021 for a subset of recipients. Before the US bailout, low- and middle-income workers without children could get just over $500, with a 7.65% cut to the first $7,030 of earned income.

In legislation, the legislature allowed the maximum payout to be just over $1,500. For one year, the formula became more generous – the loan percentage rose to 15.3% – and the age requirements were also relaxed. Workers without children previously had to be at least 25 and under 64 before the law took effect. For 2021, lawmakers lowered the age to 19 and abolished the maximum age.

It’s a relatively narrow income range, but these people would have received “much larger” payouts under the loan, Maag said.

At her ATAX tax office in Midtown Manhattan, office manager Arlenys Nunez said more of her clients without children are getting larger refunds because of the Earned Income Tax Credit.

Though some people are seeing smaller or equal refunds due to smaller lump sums for the child tax credit, Nunez said, “We know that increasing the [Earned Income Tax Credit]the child tax credit and childcare credit help our customers get a bigger refund.”

About 25 million workers took out the loan last year, according to IRS statistics. While that’s a big number, even before the pandemic, there were concerns that the loan would still be overlooked by taxpayers. From the tax years 2011 to 2018 shows the IRS’s own data two out of ten eligible households do not participate in the credit.

https://www.marketwatch.com/story/just-when-americans-could-use-some-extra-cash-the-tax-average-tax-refund-exceeds-3-400-this-tax-season-heres-why-11647265220?rss=1&siteid=rss Just when Americans could use some extra cash, the average tax refund this tax season tops $3,400 — here’s why

Brian Lowry

InternetCloning is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@internetcloning.com. The content will be deleted within 24 hours.

Related Articles

Back to top button