SAN ANTONIO — Many of us are relying on our tax return this year for a financial boost as inflation continues to squeeze our budgets, but you might want to brace yourself before you peek at your refund amount.
You might feel a bit of tax refund trauma. IRS data shows the average refund this year is about $3,000. That is about $400 less on average than last year. Here is why:
“Perhaps the biggest change this tax season is the expiration of the pandemic relief programs,” said Karen Orosco, president of global consumer tax at H&R Block. “Most of those programs were put in place over the last couple of years, and they provided an additional tax benefit to a large portion of tax filers. So, families with children or workers that don’t have children, small business owners, those tax benefits have now expired in the current tax season.”
“In general, people with families are getting lower refunds because the child tax credit was reduced,” said Jose Garcia, an account with Mission Tax and Financial Services.
Yet, you can still leverage your return for the most money by looking for different credits and deductions.
“There may be some of those expenses that qualify for a credit like a purchase of an electric vehicle,” Garcia said.
Other credits and deductions could include: Installing solar panels, buying a first home, doing home renovations, or contributing to a retirement fund.
Many of us also did extra work to make ends meet because of inflation. Make sure to include that income on your return.
“If you’re an employee with a company and, for instance, many of us are familiar with getting a W-2, but those gigs and side hustles don’t work the same way,” Orosco said. “So it’s so important you keep great records, save your receipts.”
The tax deadline is April 18. File earlier to get your refund sooner.
“Why wouldn’t you want to get your money back?” Orosco said. “It’s your money. Why wouldn’t you want to get that money back as fast as you could? We highly recommend that you file by the April 18 deadline, but we also know there are some situations where you maybe can’t. You aren’t ready and need to file an extension.”
You will need to file an extension by April 18, too.
“It’s really important to file because actually, the biggest penalty is failure to file by the deadline when you owe,” Orosco said.
“Filing an extension doesn’t mean you don’t have to pay the taxes if you owe the taxes,” Garcia said.
If you owe, you will still have to make an estimated payment by April 18, even with an extension. Apply for a payment plan if you owe money and do not have the total amount by April 18.
The quickest way to get a refund is to file electronically and direct deposit it to your bank account. Returns done that way are taking about two to three weeks. Otherwise, you may wait four weeks or more for a refund if you file a paper return. Check your refund status with the IRS' Where is my refund? tool.