The flood of federal pandemic-relief money was welcome last year. But this year, many are feeling a lot of anxiety, disappointment, and confusion as taxpayers prepare their 2021 returns.
Many people depend on the cash to make ends meet, but unfortunately, according to William Neilson, formerly of the IRS and current associate tax editor at business and economic forecasting publisher Kiplinger.com,many tax preparers will be getting smaller-than-expected refunds. This seemed a bit long. Could we cut it down to something like William Neilson, formerly with the IRS and Economic forecasting publisher with Kiplinger.com
In a Bankrate.com poll of almost 2,500 people, smaller tax refunds, potential IRS processing delays, and diminished purchasing power are the top concerns among taxpayers.
- For people expecting refunds, 2/3 had concerns
- The most-cited concerns are a smaller payout in their refund (29%)
- The second-most cited concern is that their refund will not provide as much help with their finances due to inflation (29%)
- The third-most cited concern is was processing delays (24%) and the potential of rising interest rates cutting into their refund’s purchasing power
“Many Americans will get smaller refunds this year because they already got half of their child tax credit funds in monthly installments during the second half of 2021,” Ted Rossman, senior industry analyst at Bankrate.com, said in a statement. It was “no wonder” that millennials (37%) and parents with kids under age 18 (37%) were most likely to say they were worried about the size of their refund, he added.
So, what are the chances of smaller tax refunds?
Some tax preparers say they’ve been bracing clients for smaller refunds as a result — but it still might sting when they see the slightly shrunken refund.
Neilson says that the smaller-than-expected tax returns could be attributed to child tax credit changes we saw in 2021. Even though the tax credit increased for the 2021 tax year, half was already paid out through six monthly payments during that year.
On a positive note, while many families may see lower tax returns because they already received advance payments in 2021, households that added new members during that year could see higher returns. Adding a new child to the family will usually increase tax returns since it adds another child tax credit.
You can also expect to wait longer to receive your tax refund…
Even before tax season started, the IRS warned people there could be more complications in processing taxes and delays in issuing refunds.
If there are no errors in the tax forms or glitches in the system, the IRS says it can still get refunds issued in less than 21 days. To receive refunds quickly says the IRS, taxpayers should make sure their returns are as accurate as possible. They should file their returns electronically and have refunds sent via direct deposit into their bank accounts instead of paper checks in the U.S. mail.
If you are concerned about your finances, CONTACT US to discuss how to keep your financial plan on the right track.
SOURCES:
- https://www.marketwatch.com/story/americans-are-worried-theyll-get-smaller-tax-refunds-this-year-unfortunately-theyre-onto-something-11645219334
- https://www.barrons.com/articles/tax-refund-advanced-childcare-recovery-rebate-credit-51645190202?st=qyevpqjf0z87gut
- https://www.foxbusiness.com/personal-finance/tax-return-low-cash-now