The tax-filing season got off to a slow start because the IRS said it needed more time to gear up for this year’s returns. But now the pace has picked up considerably.
About 40 percent of the returns expected to be filed this year were already received by the end of February. And no wonder: The average refund issued by the IRS so far is $3,034, up 3 percent from last year, according to data released by the IRS yesterday.
The number is even slightly higher for those requesting direct deposit of refunds into their bank accounts. This group is benefiting from an average refund of $3,096. According to the IRS, almost 88 percent of taxpayers entitled to refunds on their 2014 returns are using the direct deposit method.
Despite the 10-day delay to the start of tax-filing season in January, attributed to the federal government shutdown last year, the IRS has doled out more than 48 million refunds by February 28, a 5.6 percent increase from the same time last year. The IRS has already processed more than 57 million individual tax returns, up nearly 11 percent from 2013, sending out roughly $147 billion in refunds. Whatever the agency did to prepare for this year’s onslaught seems to be working.
According to a recent survey conducted by investment services firm TD Ameritrade (as noted in a CNN report), 61 percent of the 1,000 respondents claim they intend to save or invest their refunds, while 21 percent plan on paying off debt. Another 18 percent say they expect to allocate the money to necessities. Only 19 percent of those surveyed admit they will probably use the refund to splurge on luxuries.
The IRS is also making it easier for taxpayers to track the status of refunds through improvements in its “Where’s My Refund?” feature. The latest information is available online at Where's My Refund? or the IRS2GO mobile app. Because the feature is updated once every 24 hours, usually during the middle of the night, the IRS advises to check it only once a day. (In fact, in past years, obsessive taxpayers clicking on the site throughout the day have threatened to overwhelm the system.) Refunds are generally issued within 21 days after receipt of a return.
Of course, while it’s nice to get a big refund – it feels like a gift – this may be a good time for a conversation between tax preparer and client on adjusting withholdings so that money is spread throughout the year. There's no reason to give the government what amounts to a large, interest-free loan every year.