Tax refunds are smaller so far this year, IRS says
FILE - The top of a form 1040 individual income tax return.
Many Americans are seeing a noticeably smaller tax refund so far this year, according to early data published by the Internal Revenue Service.
The average refund check as of Feb. 2, is worth $1,395, about 29% lower compared to the $1,963 average recorded in 2023. That is based on nearly 2.6 million tax refunds collectively worth about $3.65 billion.
Despite this, the IRS has cautioned taxpayers that the average refund amount will likely change in the coming months as more returns are processed.
Americans who expect to receive the earned income tax credit, a tax break for low- to moderate-income workers, or the child tax credit, cannot legally receive their refund before mid-February, which could also be distorting the picture.
Taxpayers typically receive a refund if they had too much money withheld and overpaid their taxes the previous year. For many families, the money can be substantial. Nearly three-quarters of filers received a tax refund in 2023, with an average payment worth about $3,176, down about 3% from the previous year.
Some tax experts said refunds could end up being much bigger in 2024, with some people receiving up to 10% more than they did last year. That would amount to a roughly $300 to $400 increase.
"For anybody whose income did not outpace inflation, they should do better," Mark Steber, chief tax information officer at Jackson Hewitt, told FOX Business. "It's not even voodoo or marketing spin, it's pretty much just science."
The IRS expects to receive more than 128.7 million individual tax returns by this year's deadline.
April 15 is the final day to file taxes
Most taxpayers will have until Monday, April 15, to submit their returns or request an extension.
It is important to remember that the extension is only to file your taxes, not to pay them. If you owe taxes, you should pay an estimated amount before the deadline so you avoid paying penalties and interest.
If you expect to receive a refund, you will still receive your money once you file your taxes.
Filing an extension will give you until Oct. 15 to file your taxes. You can file for an extension through your tax software or preparer of preference, the IRS Free File tool or via mail.
What if I file my taxes late?
If you missed the tax deadline and you don't file for an extension, there are several penalties that you might receive. If you missed the deadline, you might receive a failure-to-file penalty. This penalty will be 5% of the unpaid taxes for each month the tax return is late, according to the IRS.
If you owe taxes and you didn’t pay them prior to the tax deadline, you will receive a failure-to-pay penalty. Interest will also be charged on both taxes and penalties owed. If you are due for a refund, you will not receive a penalty and you will receive your tax return payment. If you had special circumstances that meant you were unable to file or pay your taxes on time, you might be able to remove or reduce your penalty.
If the amount of taxes you owe becomes too large, you can apply for a payment plan. Payment plans will allow you to pay off over time.
The Associated Press and FOX Business contributed to this report. This story was reported from Los Angeles.