IRS Issues Bigger Tax Refunds for 2024 Tax Season
The Internal Revenue Service (IRS) has announced that it is issuing bigger tax refunds for the 2024 tax year compared to the previous year, marking a potential boon for Americans who rely on their annual refund to help pay down debt, start an emergency fund, or deal with rising costs.
According to the latest tax season update, the average tax refund as of February 16 is $3,207, 2.1% higher than a year ago. This increase 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. The previous year’s refund dip was a double whammy for households already hit by inflation, pushing up prices of everything from food to housing.
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.
Workers whose pay didn’t keep up with inflation last year are likely to get bigger tax refunds — up to 10% more, according to Jackson Hewitt’s chief tax information officer, Mark Steber. According to a recent Credit Karma poll, tax refunds, which often represent a household’s most significant annual influx of cash, are likely to be used to pay for necessities by 4 in 10 taxpayers who expect a refund this year.
However, the increase in the refund does not necessarily guarantee a bigger refund for everyone. The tax refund amount one will receive will depend on individual circumstances, ranging from income to life changes, such as having a new child in the family, buying a house, or getting married. Some taxpayers could end up owing more in 2024, such as if they took on a side gig last year to offset the impact of inflation and didn’t pay quarterly self-employment taxes. Other issues could lower a refund, such as families with teenage children aged out of the $2,000 child tax credit since only kids under 17 qualify for the benefit.
As of yet, only about 34.7 million people have filed tax returns, a fraction of the 146 million individual tax returns the IRS expects this year. According to the IRS, taxpayers who file electronically will get their refunds within 21 days. However, the IRS cautions that some returns could take longer, including those filed on paper forms, which require more time to process. The “Where’s My Refund” tool, which updates refund data overnight, should show filing status within 24 hours of filing for those who file electronically.
The increase in tax refunds is expected to provide relief to Americans who have been hit hard by rising inflation and the ongoing pandemic. With the tax season still ongoing, it remains to be seen how the data will fluctuate until the IRS stops accepting tax returns on April 15.
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