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Key statistics released by the IRS for the week ending February 2, 2024 show notable shifts in tax return filing, processing and refunds. The 2024 tax season began on January 29, about a week later than last year, and as a result fewer taxpayers were able to file their taxes.
The decline in tax returns sheds light on possible changes in taxpayer behavior, economic factors or the impact of changes in tax policy. The IRS's willingness to handle the season effectively despite fewer tax returns indicates a well-prepared system, but the lower filing volume and tax refund amounts raise questions about the overall tax filing landscape.
Related: When can I expect my tax refund in 2024?
Decrease in tax returns filed
Even though tax season officially began on January 29, 2024, many first-time filers typically begin preparing their tax returns in early January. Despite the late start, the almost 20% decline is worrying.
In 2023, as of February 3, Americans had filed 18,946,000 tax returns. This year, Americans had filed just 15,318,000 tax returns as of February 2nd. This 19.1% decline is likely a combination of the late start to tax season and concerns about possible changes.
This is highlighted in tax returns filed by tax preparers. Many tax advisors have indicated that they are waiting for Congress to resolve the outstanding issues surrounding the potential retroactive tax changes (including the child tax credit). For this reason, many professional tax preparers wait to file their clients' tax returns.
Lower refunds for taxpayers
Of particular interest is the significant decline in the total refund amount and the average refund amount. This shift could impact individuals' financial planning and spending and reflect broader economic conditions and changes in tax policy.
So far in 2024, the average tax refund amount has fallen to $1,395, compared to $1,963 this time last year. That's a decrease of 28.9%. We expected smaller tax refunds this year due to the expiration of many tax credits, but this is significantly more than expected. Additionally, the total number of refunds overall decreased by 67.3%.
This reduction could have broader implications for individual financial planning and economic activity, as refunds often contribute to consumer spending.
looking ahead
As the 2024 tax season unfolds, this early data from the IRS serves as a critical indicator of how the season will unfold and the evolving tax filing environment.
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