The IRS just released updated numbers for the 2014 tax season, reporting that 48 million refunds have been issued as of Feb. 28. The average tax return is $3,034, 3 percent higher than the average of $2,944 for same time in 2013.
The IRS reports that it has received 1.4 percent more tax returns than it had at the same time last year, with just under 59 million tax returns filed so far. Additionally, 7.5 percent more taxpayers are choosing to file for themselves over last year, though the majority of tax returns are still filed by professional services.
Is a Big Tax Refund Really Good News?
A tax refund of $3,034 is significant, and while most Americans receiving a tax refund see it as a windfall outside of their regular earned income, it’s actually just money that they’ve been missing out on for a whole year. Needlessly withholding more taxes than one owes just means the government is getting an interest-free loan for the year.
A refund of $3,034 means that more than $250 in taxes was needlessly withheld from a taxpayer’s paychecks each month. For the average household in America, that’s like missing out on a whole paycheck and a half of money.
Instead of having the government hold onto an extra $250 each month, adjusting withholdings to increase take-home pay can give taxpayers a greater level of financial freedom and flexibility. It could be the difference of avoiding overdraft or other bank fees that add up over the year.
Still, with 61 percent of Americans planning to save their tax refunds, according to a TD Ameritrade survey, a big tax refund could still be a needed boost for taxpayers’ savings accounts.
Photo credit: 401(K) 2013