If you got used to receiving a tax refund in recent years, don’t hold your breath for the same this tax season. While the IRS is better staffed and equipped this year for prompt refunds, pandemic benefits that sweetened the deal have now expired.
CBS News reports that the average tax refund in 2022 (for the 2021 tax year) was almost $3,200, a 14% jump from the prior year, but “the typical tax refund this year could be around $2,700, or roughly what taxpayers got in 2021 (for their 2020 taxes).” The IRS sounded the alarm in November, stating in a news release that refunds may be smaller in 2023.
“Taxpayers will not receive an additional stimulus payment with a 2023 tax refund because there were no Economic Impact Payments for 2022. In addition, taxpayers who don’t itemize and take the standard deduction won’t be able to deduct their charitable contributions,” the IRS stated.
While few entrepreneurs and business owners see tax refunds at all, those who do may need them more than they did before. A survey from Bankrate found that 75% of Americans say this year’s refund is important to their financial health. Last year, 67% said the same. More respondents this year also plan to use the refund to pay down debt over funding savings.
If you or loved ones are facing these realities, the IRS wants you to know that you shouldn’t rely on receiving a 2022 federal tax refund by a certain date because some returns may require additional review and may take longer. That being said, as Forbes’ Kelly Phillip Erb reports, many taxpayers who have already filed received their refunds within weeks.
“The most recent information from the IRS confirms that they still expect to issue more than nine out of 10 refunds in less than 21 days, assuming that you file electronically, rely on direct deposit, and have no issues with your return. However, if you’re expecting a tax refund and you filed on paper, it could take four weeks or more to process your return,” she writes.
According to the IRS, the tax returns that tend to take longer to process include returns that:
- Are filed on paper (as opposed to being e-filed).
- Include errors, such as incorrect Recovery Rebate Credit.
- Are incomplete.
- Need further review in general.
- Are affected by identity theft or fraud.
- Include a claim filed for an Earned Income Tax Credit or an Additional Child Tax Credit.
- Include a Form 8379, Injured Spouse Allocation, which could take up to 14 weeks to process.
And, whether you’re expecting a refund or not, there’s optimism that the easing of pandemic restrictions along with new hires and investments at the IRS will decrease the headaches taxpayers and tax preparers have had to endure the past few years. “So far, that feels like it might be the case,” she adds.
Another bit of good news: Taxpayers have more time to file tax refund claims for returns filed earlier in the pandemic. The IRS is lengthening the lookback period for pandemic-era refund claims for returns with original due dates as early as April 2020. So even if you’re not expecting a refund this year, be sure that you received past refunds owed to you, perhaps due to losses you suffered in 2020 and 2021.
If you have any additional questions about this year’s tax season, feel free to contact us.