The Average Tax Refund for 2022 Keeps Growing. How Does Yours Stack Up?
- The average tax refund this year is higher than the average refund last year.
- Whether that's a good thing is questionable.
Filers are getting a lot of money back from the IRS.
Last month, the IRS put out data on tax refunds and found that the average sum filers received in 2022 was $3,025. But as more and more tax returns roll in and get processed, that number keeps getting updated. And so as of late May, the average refund was recorded at $3,039 -- a notch higher than where it was in early May.
Now what's interesting is that so far, the average refund in 2022 is notably higher than 2021's average refund, which came to $2,827. A big reason could be due to the boosted Child Tax Credit.
But all told, tax filers are clearly seeing a lot of money hit their bank accounts this season. And that's not necessarily a good thing.
Why you really shouldn't want a higher tax refund
It's easy to look at a large tax refund as a plus. But remember, a tax refund isn't a gift from the IRS (those don't exist, unless you want to put tax credits into that category). Rather, a tax refund is simply a repayment of money you earned but never collected upfront.
If you got a $3,000 refund this year, it means you paid the IRS $3,000 more in taxes than you were required to last year. And that also means you may have wound up cash-strapped at many points last year in the absence of collecting that money.
Plus, when you get a refund, all you get is the money back that you weren't required to pay. But you don't get to collect interest on that refund despite having waited to get that money.
That's why it pays to reassess your tax situation if you wound up with a large refund this year. If your refund is in line with what the average filer received, talk to your payroll department at work about adjusting your withholding to have less taken from your paychecks. It may take a couple of pay periods for the company you work for to process that request, but if you update your tax paperwork, you could soon see your paychecks increase.
The average refund could grow
Right now, the IRS is sitting on lots of paper tax returns that the agency has yet to process. As it works its way through that pile, we could see the average 2022 tax refund increase or decrease.
But all told, there's a good chance that this year's average refund will end up being higher than the average refund in 2021. And that means filers across the board should consider making changes to their withholdings.
Right now, living costs are soaring due to inflation, and many people are racking up debt on their credit cards just to stay afloat. Having extra money in their paychecks could spare a lot of people a world of financial stress. And since it's money they're entitled to, there's no reason not to claim it right away, as opposed to having to wait until the 2023 tax-filing season to get it.
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