The IRS recently published statistics on the 2021 tax season which revealed some interesting factoids, such as:
- If you got a refund this year, chances are that it was higher than the one you received in 2020. The average tax refund amount paid by the IRS through the end of December 2021 was $2,815, or $269 higher than the prior corresponding period
- While direct deposit is by far the fastest way to get your tax refund, it is also looks like the more rewarding with the average direct deposit refund coming in at: $2,879.
- Of the 152 million tax refunds e-filed, nearly 85 million were done via a tax professional, vs about 67.5 million being self-prepared. Despite the abundance of tax filing software, it seems like more people like the comfort of a tax professional when filing their returns. Given the number of new tax credits/deductions, delayed payments and complexity of the US tax code, this is not surprising.
- IRS website usage continued to grow as getting hold of a live agent proved to be very hard. More and more ta payers also use the IRS website and portals to update payment details for stimulus checks and the advance child tax credit (ACTC)
While it’s always nice to receive money from the IRS, rather than paying them, a refund is basically a free loan to the IRS via overpayment of your taxes through the year. If you are consistently getting a larger than average refund, chances are you are withholding too much in taxes from your paycheck or other income sources.
To correct this and in essence get your refund payment through the year, adjust your paycheck withholding. You can find many withholding calculators online, including at the IRS.
Once you estimate your correct withholding submit an updated form W4 to your employer’s payroll department and enjoy your larger take home pay when the next pay period rolls around.