The Internal Revenue Service (IRS) is paying $23 billion less in tax refunds for the 2023 filing season—with the average refund amount found to be lower by nearly $300.
The IRS has issued over 69 million refunds collectively worth $198.868 billion for the week ending April 7, 2023, according to the agency’s filing statistics. Compared to the $222.344 billion in refunds handed out in the 2022 season, the 2023 filing season’s refund is $23.476 billion smaller or about 10.6 percent lower.
The average refund amount between the filing seasons has dropped from $3,175 to $2,878, a decline of 9.3 percent or $297. In fiscal 2022, the IRS collected $2.9 trillion in individual income taxes.
Back in January, the IRS had suggested that refund amounts could be smaller this time around. “Due to tax law changes such as the elimination of the Advance Child Tax Credit and no Recovery Rebate Credit this year to claim pandemic-related stimulus payments, many taxpayers may find their refunds somewhat lower this year,” the IRS had said in a Jan. 23 news release.
The U.S. government handed out three rounds of stimulus checks to Americans during the pandemic period. People could claim the missed first and second rounds of stimulus checks on the 2020 tax return. Any missed third-round stimulus checks were claimed in the 2021 return which was filed in the 2022 season.
The federal government had also expanded the Child Tax Credit (CTC) program during the pandemic, boosting benefits per child from $2,000 to $3,600 for children under the age of 6, and to $3,000 for children between the ages of 6 and 17.
The benefits of stimulus payments and CTC have now ended, thereby contributing to a lower refund amount during the 2023 filing season.
Americans Concerned Over Smaller Tax Refunds
Smaller tax refunds pose a major issue for Americans, according to the results of a Bankrate survey published last month. When asked how important the tax refund is to their overall financial situation, 43 percent said that the refunds are “very important” while 32 percent said it was “somewhat important.”