Tax season is here and Americans are busy getting their finances in order to file their returns for 2022. But there’s not necessarily treasure at the end of the process. We’re talking about a tax refund.
According to a new poll by GOBankingRates, which garnered over 1,400 responses, not everyone is banking on getting money back; in fact, 33% of respondents say they’re not expecting tax refunds.
The survey also found that 10% expect up to $500 in a tax refund; 12% expect between $501 and $1,000; 15% anticipate receiving between $1,001 and $2,000 and 30% expect $2,000 or more back.
No Tax Refund Is Good News
Now, before you go pitying the poor dear who isn’t getting any money back from Uncle Sam, recognize that this is actually good news. That poor dear actually planned better — and used money more wisely — than the person who is getting a refund.
Unless you calculated for a tax refund and are expecting one, not receiving one is good news and means you planned perfectly.
“A third of tax filers in the U.S. are not going to receive a refund this year, and that is actually a good sign,” said Marie Kelly, the founder of Kelly CPA. “The reason being that their withholdings throughout the year were closer to what they actually owed. In other words, they weren’t sending more money to the feds than they should be, so they didn’t have to wait until filing to get a return. The IRS should not be your savings account — they don’t pay interest.”
What else should Americans know about their tax refunds?
Your Tax Refund May Be Lower Than It Was in 2022
Some people banking on big refunds like they got last year might be disappointed when their check or direct deposit arrives. The average refund is going to be lower in 2023 than it was in 2022 because of a few key factors.
“In 2021, people could deduct charitable contributions of up to $300, but it wasn’t available for 2022,” said Levon Galstyan, CPA at Oak View Law Group. “The child tax credit, which was temporarily enhanced to provide $3,000 for children under 18 and $3,600 for children under 6 in 2021, will be subject to previous rules in 2022. This means that the maximum credit available for children under 17 will be $2,000. The credit for child and dependent care expenses, which was worth up to $8,000 in 2021, will also be reduced to a maximum of $2,100 in 2022.”
You Should Have It in Roughly Three Weeks
After you file your taxes, you can expect to wait about three weeks to get your refund.
“Tax refunds typically arrive within 21 days after filing your taxes but can take longer if there are errors on the form or additional processing is required,” said Dana Ronald, CEO of Tax Crisis Institute.
If You Don’t Get It, Follow Up
The IRS may seem like an organization with no human representatives. But they have a customer service phone number you can call, and you should call it if you don’t get your refund within a reasonable timeframe.
“If you expect a refund but don’t receive it within a few weeks,” Ronald said, “contact the IRS or your tax preparer for more information.”
Beware of Scammers
If you’re expecting a refund — especially a sizable one — you should be on the watch for scammers. You can dodge them by simply knowing what the IRS will and will not do.
“The IRS will never call and demand payment by phone or email,” Ronald said.
Use Your Refund To Pay Down Debt
In economically tough times such as those we’re living in now, when inflation is still causing prices to soar and mass layoffs are scorching jobs, it’s really difficult not to use your refund for some relief or simply just some much needed spending joy.
You may be thinking you could take a little getaway with the money. Or do a little home renovation for spring. But if you’re carrying credit card debt, as the vast majority of consumers are, the best way to use your tax refund is to pay this down. About 40% of people in a recent GOBankingRates survey said they plan to pay debt or bills.
“Interest rates rose significantly last year, making it much more expensive to carry debt,” said Richard Barrington, a financial analyst from Credit Sesame. “In particular, credit card rates rose by nearly 4% during 2022. Using a tax refund to pay down some or all of your credit card balances would leave you less exposed to elevated interest rates.”
More From GOBankingRates