IRS refunds are dropping to $2,933 this year

The Internal Revenue Service is reminding taxpayers that they will get a smaller refund this year because of the coming to an end in just a few weeks.

The IRS said that it has issued about 53 million refunds as of March 17, worth $158.1 billion. The average refund check this year is $2,933 about 11% less than the $3,305 average last year.

The decrease in refund size is worrying for millions of Americans who depend on Uncle Sam to make major purchases, save for retirement or pay off debt. Millions of taxpayers are still struggling with the worst inflation bout in a generation that has caused the cost of staples like food, rent and gasoline to go up.

According to Bankrate, 75% of adults who expect to get a tax refund this year believe that the money is important for their overall financial situation. About 43% said the refund is very important, compared to 32% who described it as somewhat important. That is about 10 percentage points higher than in 2022, when 67% of Americans planned to rely on their refund.

The federal government did not provide additional tax credits or pandemic-related incentives in the year 2022, which is one of the main reasons for the drop in refund size. In 2021, the IRS delivered a third round of stimulus payments worth up to $1,400 per person. Ted Rossman, senior industry analyst at Bankrate, said it was reasonable to expect that many people will get smaller tax refunds this year. The expanded child tax credit and the expanded child and dependent care credit are some of the reasons that many of the pandemic-related tax breaks have expired. Taxpayers are usually given a refund if they have too much money withheld and overpaid their taxes the previous year. Nearly three-quarters of the families received a tax refund in 2022, with an average payment of $3,176, up from $2,800 in 2021.

The IRS said in a post on preparing for the upcoming tax season, the refunds may be smaller in 2023. If you get an extension from the IRS to file your taxes, you still have to pay any money due by April 18 or pay penalties and interest on any amount not paid.