We are in the throes of income tax season and there are a growing number of indicators — including reports from different collection operations across the country — that this year’s income tax refund season is going to be less bountiful than the industry has seen in recent years.
The average income tax refund is down 11% on a year-over-year basis, according to data released by the Internal Revenue Service. The average refund handed out so far — through March 3, 2023 — is $3,028, compared with $3,431 last year. That few hundred dollars may not seem like much, but when you take into account how much inflation has increased in the past year, consumers are being forced to spend more than ever for just about everything. For those hoping that there are a lot of consumers who are waiting to file their taxes, the number of returns the IRS has received is virtually the same as the number it had received at this point last year.
There is one good data point in the IRS’s figures. The number of returns that have generated a refund is 10% higher on a year-over-year basis.
More one-third of consumers who participated in a survey commissioned by Bankrate.com feared their tax refunds will not make as much of a financial impact as they have in years past because of inflation and rising costs. Paying down debt is the most common top priority for consumers with tax refund money this year. Twenty-eight percent of consumers listed paying down debt as their top tax refund priority, up from 23% who said so last year.
Agency owners and senior executives across the country have lamented that income tax refunds are having less of an impact on consumers paying down their debts as it has in years past. At this point in the cycle, one owner said, if you are waiting for tax season to start, it’s already over.