America's tax refund shock: Average worker to receive 29% LESS this year from the IRS - so how much should you expect?

• The average refund check through February 2 is worth $1,395 this year, 29 percent less compared to the $1,963 received on average last year 
• The IRS does not appear alarmed, noting ‘a strong start to filing season 2024’
• The tax season started on January 29, seven days later compared to last year  

Millions of Americans awaiting their refund checks could be disappointed, as early data shows that average workers are receiving 29 percent less in tax refunds from the Internal Revenue Service (IRS) this year.

The average refund check through February 2 is worth $1,395, according to statistics published by the IRS on Thursday. This amount is significantly less compared to the $1,963 received on average last year.

Despite the noticeable reduction in the average refund issued this year so far, the IRS does not appear alarmed, noting that the average refund amount is likely to change in the coming months.

The tax season started on January 29 this year, and as of February 2, the IRS has only been processing returns for five days.

The 2023 filing season began on January 23 last year, giving the agency with an additional week to receive and issue refunds by the same time.

Despite the noticeable reduction in the average refund issued this year so far, the IRS does not appear alarmed, noting that the average refund amount is likely to change in the coming months

The IRS said in a release: ‘Considering the loss of 7 days in this comparison, filing season statistics below show a strong start to filing season 2024, with all systems running well.’

Daniel Rahill, a CPA in Chicago, said that early filers may be receiving smaller refunds due to the fact that those who earned higher salaries in 2023 did not increase their tax withholding accordingly.

‘[I]t will be an interesting analysis to see where the next wave of numbers come in once we receive more tax filing data,’ he told USA Today.

Some tax experts also suggest that refunds could be much higher than last year, estimating an increase of roughly $300 to $400.

‘For anybody whose income did not outpace inflation, they should do better. It’s not even voodoo or marketing spin, it’s pretty much just science,’ Mark Steber, chief tax information officer at Jackson Hewitt, told FOX Business.

The amount Americans have received in rebates has been rising year-over-year, according to Internal Revenue Service (IRS) data. For the 2022 season, the typical taxpayer got back $3,012.

A refund is money that you overpaid to the IRS through paycheck withholdings, which the agency has been holding until you file your tax return.

Rebecca Chen, reporter and CPA, told Yahoo! Finance, said experts are warning Americans need to change their attitude around tax refunds

A refund is money that you overpaid to the IRS through paycheck withholdings, which the agency has been holding until you file your tax return

Experts warn that, while a refund may seem like a windfall, overpaying taxes means missing out on using the money during the year.

They say it could be spent on family and friends in the holidays – or invested so it grows in value. At the same time, too much tax up front provides the IRS with an ‘interest-free loan.’

‘Experts are saying that we have to change our mentality about tax refunds and remind ourselves that it is our money to begin with,’ Rebecca Chen, reporter and CPA, told Yahoo! Finance.

‘And when you have too much withholding with the government, it is essentially like giving them a interest-free loan throughout the year.’

This is quite a big deal, she added, because we are living in a very high-interest and high-debt environment.

At its latest meeting last month, the Federal Reserve kept interest rates at a 22-year high between 5.25 and 5.5 percent, where it has been since last July.

Some experts warn that while a refund may seem like a windfall, overpaying taxes means you are missing out on funds you could have had during the year to save or invest

The amount Americans have received in rebates has been rising year-over-year, according to Internal Revenue Service (IRS) data

This has a knock-on effect on mortgages and credit card loans. The average credit card interest rate has soared above 24 percent, according to Lending Tree.

If you are one of the people who are seeing your credit card balances go up and seeing high-consuming debt, Chen said, it does not necessarily make sense to withhold with the government while paying such high interest.

‘Lower your withholding and use that money to pay off your high interest rate credit card debts and you’ll be better off financially,’ she said.

If less is taken out for taxes, it means you will have more in your paycheck each month which you could invest or put in a high-yield savings account.

If an average refund of $3,000 was placed in a high-yield account with five percent interest, this would make $150 throughout the year.

WHAT TO KNOW THIS TAX SEASON

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Cross-state commuters and Americans ‘working from anywhere’ face DOUBLE taxation risk – will you be caught out?

The surging stock market could push up retirement taxes for middle-earners, experts warn – here’s what you can do to avoid a shock bill

Tax season starts today – and things are different this year: Here are six key changes you MUST know about

IRS crime chief reveals the telltale signs that a tax-preparer is a SCAMMER – and other top tips to steer clear of fraud

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