“One of the reasons that I could see people having smaller refunds is that all unemployment benefits will be fully taxable for 2021. For 2020, the first $10,200 was exempt from federal tax,” Adam Knihtila, chief financial officer at Adam Kae & Associates, told the consumer financial services provider.
“Another reason for smaller refunds is families that received the Advance Child Tax Credit payments but no longer qualify because their annual income has crossed over the qualification thresholds. Since the default was to opt-in families to receive the payments (they were required to go to the IRS website to opt-out), this could be a potential pothole that people won’t realize until they file,” he added.
Better Start Than Expected
However, early data out of the Internal Revenue Service (IRS) confirmed that the agency has issued more than 22 million tax refunds that are worth roughly $78 billion. That means the average refund comes in at $3,536, which is up by about 23 percent from the average refund of $2,880 at the same period last year.
The IRS, though, did note that “weekly numbers can shift dramatically during the initial weeks of filing season due to numerous factors, including the calendar and filing patterns that can change year to year.”
There are, however, certain instances in which a taxpayer will get their hands on a larger return this year.
“On the plus side, eligible individuals who didn’t get this money (CTC) for some reason can request it on their tax returns,” Bankrate’s industry expert Ted Rossman said in a statement.
“The same goes for those who didn’t get the $1,400 stimulus payments they were entitled to receive in 2021,” he continued.
Other results from the survey indicated that tax returns are more important for women. Nearly 80 percent of women said that a tax return was important or very important to their overall financial health. In comparison, 59 percent of men said the same.
In addition, the need for a tax refund showed a strong correlation with household income.
80 percent of lower-income households (under $50,000) admitted that a refund is important or very important, compared to 64 percent of middle-income households ($50,000-$99,999), and 47 percent of higher-income households ($100,000-plus).
The survey further revealed that Americans generally favored filing their taxes early, with 44 percent saying that they submitted their returns in February. In comparison, 25 percent plan to file in March, 16 percent in April, and 4 percent after that.12 percent said they plan to file but don’t know exactly when.
“Filing early makes a lot of sense, especially if you’re expecting a refund,” Rossman said.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.