The IRS has already processed 62 million tax returns and refunded more than $135 billion this tax season. These early-bird taxpayers have received an average tax refund of $3,145, which is 5.8% higher than the same period a year ago.
“The bigger average refund marks a reversal from the dip that the typical taxpayer experienced in 2023, when refunds were 3% lower due to the expiration of pandemic tax benefits. That proved to be a double whammy for households already hit by inflation, which has pushed up prices of everything from food to housing,” says CBS Money Watch’s Aimee Picchi. “But this year, some taxpayers are receiving bigger refunds after the IRS adjusted many of its provisions for inflation, pushing the standard deduction and tax brackets about 7% higher for the 2023 tax year, which is the period for which taxpayers are now filing their taxes.”
Every tax season has its own “personality,” and this one is no exception. In addition to the differences above, the U.S. Government Accountability Office has reported that, thanks to its initiatives to improve its processes, the IRS:
- Has cut down its taxpayer call wait times. The average time to answer was shortened from 28 to 3 minutes.
- Is doing a better job answering those phone calls. During the 2023 filing season, it answered 7.7 million calls—a 65% increase compared to 2022.
- Reduced its backlog of tax returns to 6.1 million returns in 2023, which is 10.3 million fewer than at the same point the year before.
- Estimates that more than 94% of individual taxpayers will have an easier time responding to correspondences and notices because they can now do so digitally.
Some taxpayers admit that they’re procrastinating on filing their taxes this year because they’re waiting for Congress to agree on a tax bill. One potential change is a more expansive child tax credit, which could increase the maximum refundable amount per child to $1,800 in tax year 2023, up from the current $1,600 per child. But waiting to file, especially if it means filing late, could backfire.
“We urge and encourage taxpayers to file when they’re ready,” says IRS Commissioner Danny Werfel. “Don’t wait on Congress. If there’s a change that impacts your return, we will make the change, and we will send you the update whether it’s an additional refund or otherwise without you having to take any steps.”
If you do wait to file for this or any reason, be sure to:
- File an extension. Failure-to-file penalties are steep (they can reach up to 25% of the taxes due). An extension allows you another six months to get your tax forms together before those penalties kick in.
- Although you’re not ready to figure out what you owe, you still must pay it (whatever it is) to avoid penalties and interest. It seems counter-intuitive, but it’s true. Estimate to the best of your ability and pay that amount by the tax deadline.
And remember that there are a few “catch-up” opportunities available until April 15 that you might want to take advantage of. These include Individual Retirement Account (IRA) and Health Savings Account (HSA) contributions. This can be especially important to do if you received a little more extra income than expected in 2023 that you’d like to offset. And then plan ahead: The earlier you can get a good picture of your potential earnings for the year, the more options you have to reduce your tax obligations. Feel free to contact us with questions.