Points to keep in mind
The Internal Revenue Service recently released data on tax refunds scheduled to be issued in 2022.
Thus far, the average payout has exceeded the refund expected for 2021 by $656.
The additional funds could be a result of the large number of Americans who received stimulus monies.
American Rescue Plan Act of 2021 provided substantial financial help to Americans affected by COVID-19.
The stimulus payments were made in the form of advances on tax credits to ensure that households received funds when they were in need. Throughout the year, the IRS was responsible for depositing funds into people’s bank accounts. Those who did not get the full amount required may still claim tax credits when filing their 2021 taxes.
The 2021 tax filing season has officially begun, and many Americans have already begun filing their returns. The IRS has supplied some statistics to provide an overview of its operations through Feb. 18, 2022, once it has processed over 35 million of them.
The average refund issued thus far in 2022 is much bigger than the average refund issued in 2021, according to these statistics. While there are a lot of possible explanations for this, the fact that millions of people are claiming unpaid stimulus funds may explain why they are receiving more than $650 in refunds from the IRS this year compared to last year.
Tax refunds increased as a result of stimulus spending?
According to IRS data, the average refund issued thus far in 2022 is $3,536. This is an increase over the $2,880 in 2021. That equates to an additional $656 in refunds for the average American who has filed a tax return thus far.
Naturally, because this is an average, some individuals may have earned less or the same amount, while others may have received thousands more. Additionally, there is a danger that the American Rescue Plan Act would result in a high number of taxpayers obtaining substantial refunds, thereby increasing the IRS’s total average return amount.
For example, the COVID-19 relief program provided $1,400 in stimulus payments to qualifying people and their dependents. Additionally, the existing Child Tax Credit was doubled from $2,000 to $3,600 for children under the age of six and from $3,000 to $4,000 for children aged six and older. While only a fraction of the original Child Tax Credit was refundable, the expanded credit is fully refundable, which means that some taxpayers will receive substantially more money than they paid in taxes.
Even though the IRS sent the full amount of stimulus checks and half of the enhanced Child Tax Credit in 2021, those who did not have their data on file with the IRS due to late filing or who added a dependent during the previous year may have missed out on receiving any of this money. If these individuals were quick to file their taxes in order to receive this money, this could explain why the average refund was greater this year.
However, things could change, as it is likely that people expecting a refund submitted their taxes earlier than those who owe. If this is the case, the substantial increase in average refunds sent during the 2022 filing season may be unsustainable. For the time being, IRS data indicates that many Americans are receiving more money from the agency than they were a year ago.
- Update on the Stimulus Package: as Living Costs Rise, Americans Struggle in the Absence of Government Assistance
- As Fresh Suggestions for the Child Tax Credit Are Put Forward, Poverty Is Becoming More Closely Tied to the Benefit
- Will Rising Gas Prices Have an Influence on Stimulus Payments?