This week, IRS reported that the average tax refund so far is $2,436, which set a record after climbing more than $200 since last year.
IRS already received more than 47 million tax returns and the average refund is calculated based on 38 million "certified" returns. Total payout so far: $93.3 billion. Some speculate that the higher average tax refund is attributable to tax law changes including sales tax deduction, increase in child tax credit and increase in earned income tax credit.
But is this a good thing for the people behind the 38 million returns? Probably not. Tax refund is not a favor from the government; instead, it is a return of the money that legally belongs to you in the first place. For people receiving a big refund, they were essentially extending an interest-free credit line to the Treasury. Nothing wrong with that, but one can tune up the withholding and have access to the deserved money much earlier. Many low-income families counting on the refund have to sign up for certain kinds of refund anticipation loans to get access to the money a few days quicker, and they can do themselves a big favor by simply getting less tax withheld in the first place.
In the same press release, IRS also reported progress in e-filing:
- So far 74% of the 47 million tax returns were e-filed, which is 5 percentage points higher than last year.
- The biggest jump comes from DIYers using computer to self-prepare a tax return. This segment increases from last year's 7.7 million returns by February end to this year's 8.7 million (14% increase).
Apparently, IRS's Free File program is a growing success too. 2.8 million returns have come through the Free File channel, a 43% increase from last year's 1.9 returns.