As we navigate through the 2024 tax filing season, retirees may be experiencing a bit of a surprise regarding their IRS tax refunds. The Internal Revenue Service (IRS) reports a nearly 30 percent decrease in average tax refunds compared to the previous year. Let’s explore the details and what this means for retirees and their financial plans.
IRS Tax Refund Is Nearly 30 Percent Lower This Filing Season
As of February 2, the IRS has witnessed a significant drop in the total tax refunds sent to taxpayers, citing a delayed start to the filing season as the primary cause. The average federal income tax refund for the 2024 filing season is $1,395, marking a nearly 29 percent decrease from the 2023 filing season. The IRS attributes this decline to the delayed commencement of this year’s filing season, which started seven days later than the previous year.
Filing Season Statistics and Refund Trends
Despite the decrease, the IRS insists that the filing season for 2024 has had a strong start, considering the seven-day lag. Refunds processed through direct deposits have decreased by 25 percent, from $2,056 to $1,543. The IRS has issued $3.64 billion in refunds, a staggering 76 percent less than the $15.69 billion refunded during the same period last year. Various metrics, including the total number of tax returns received and processed, also reflect lower figures compared to 2023.
Understanding the Delay and Future Expectations
Refund amounts are anticipated to increase as the IRS awaits the issuance of certain credits. Due to legal restrictions to prevent fraud, the Earned Income Tax Credits (EITC) and Additional Child Tax Credits (ACTC) cannot be issued before mid-February. Early filers of these credits can expect refunds to be processed by February 17.
Taxpayers may receive up to $1,600 in refundable ACTC credits per qualifying child. At the same time, EITC is available for Americans with annual incomes below $63,698, offering credits of up to $7,430 for three or more qualifying children. The deadline for filing taxes in the current season is April 15.
Higher Tax Refunds on the Horizon
While initial refund checks have been lower, experts predict taxpayers may see more substantial refunds this year. Mark Steber, Chief Tax Information Officer at Jackson Hewitt, anticipates double-digit increases in refunds for some taxpayers in the 2024 filing season compared to the previous year.
Inflation Impact on Refunds
The elevated inflation in recent times has led the IRS to adjust provisions, increasing standard deductions and raising tax brackets by 7.1 percent in 2023. This adjustment, coupled with last year’s median worker earnings rising by 5.5 percent (lower than the IRS’ inflation adjustments), may result in up to 10 percent more refunds for specific individuals.
Benefits for Middle and Lower-Income Groups
Steber suggests that middle- and lower-income individuals are more likely to benefit from these higher refunds, providing a crucial financial boost for many households. Tax refunds often serve as the most substantial annual cash injection into household budgets, enabling families to enhance savings or reduce debts.
Maximizing Your Tax Refund
Making strategic choices during the filing process is essential to ensure retirees get the most out of their tax refunds. For example, individuals who have experienced the loss of a spouse can file as a widower for two years, allowing them to claim double the standard deduction.
Additionally, taxpayers who have made energy-efficient home upgrades, such as installing new doors, windows, or insulation, can claim tax credits under provisions of the Inflation Reduction Act, contributing to higher refunds.
Tips for Getting Refunds
The IRS provides various options for receiving refunds, including paper checks, U.S. savings bonds, mobile payment apps, and prepaid debit cards. However, the fastest method is through direct deposit into checking, savings, or retirement accounts. Taxpayers can check their refund status approximately 48 hours after e-filing through the IRS website, with processing times typically up to 21 days for e-filers.
Refunds may take four weeks or more for those who filed by mail, and corrections can extend processing times. If discrepancies or changes occur, the IRS notifies taxpayers, explaining any alterations made. If a taxpayer did not receive the expected refund, reasons could include errors in their returns or the refund used to settle federal or state debts.
In case of missing or destroyed refund checks, taxpayers can request replacements by calling the IRS automated system at 800-829-1954 or speaking directly with an agent at 800-829-1040.
