As we are winding down from last week's tax filing, most of us are thinking about how we are going to spend this year's tax refund. This year is the first year after the pandemic, and our tax refunds may not be what we are expecting.
This year, many Americans will receive smaller tax refunds as a few epidemic policies have expired and tax credits, such as the increased child tax credit and a reduced Earned Income Tax Credit for people without children, have returned to their prior levels.
The change was caused by the rollback of COVID-era government benefits. As part of the American Rescue Plan, the Biden administration raised the child tax credit for children under the age of six in 2021 from $2,000 to $3,600.
SMALLER TAX RETURNS
According to data compiled by the Internal Revenue Service, the average refund check issued to the 72 million Americans who submitted their 2022 income tax returns as of March 17 was down 11%. Bloomberg News was the first outlet to use the IRS data. The federal government had issued $158 billion in income tax refunds as of March 17, down from $171 billion last year.
According to Emily Peck of Axios, many people rely on their refunds to make ends meet, pay off debt, or finance indulgences like vacations. However, the returns are getting smaller at a time when high inflation already makes it difficult to pay expenses.
As per Internal Revenue Service data, Americans who submitted their 2022 income tax returns had smaller refunds. However, the benefit was only available for a short time, and attempts by the administration to prolong it were rejected by Congress. Tens of millions of Americans are trying to make ends meet due to persistently high levels of inflation, so the reduced returns come at an unfortunate time. Last month, prices rose 0.4%, just shy of January's 0.5% gain.
- The average return was $2,993, down 9.4% from $3,305 at the same time last year, according to the tax collection agency.
- The federal government had issued $158 billion in income tax refunds as of March 17, which is less than the $171 billion paid out at the same time last year.
- Rollback American Rescue Plan tax credits this year for children under the age of six.