April 18 (UPI) -- Just about as many Americans as last year filed their income tax returns early as the deadline arrives Tuesday, but Internal Revenue Service data show many can expect to see lower refunds.
About 90.1 million people filed their taxes ahead of the deadline, relatively unchanged from 2021 and of those about 60 million people were eligible for a refund, also more or less even with the previous tax season.
What has changed is the average refund. Taxpayers last year got $3,226 back on average. The average for this season is $2,910, some 9.8% less.
Many of the support programs meant to keep families in the black during the COVID-19 pandemic, such as stimulus checks, are no longer coming in to pad refunds. During the pandemic, for example, households qualified for $7,200 in tax credits if there were two children under age 6. That credit is now at $4,000.
"The biggest change this year was that taxpayers didn't have to contend with complicated pandemic relief on their tax returns, but that also meant refunds were smaller, dropping by about 10% from 2021," Erica York, a senior economist at the Tax Foundation, told UPI.
York said the expiration of the bloated expansions for everything from the Child Tax Credit to the Earned Income Tax Credit lowered the refunds for average taxpayers.
She added that this year's taxes might be a bit easier to file in general because filers no longer have to wade through the complicated forms to address pandemic relief programs.
"Unfortunately, a return to normal doesn't mean things are good, because taxpayers are still likely to face frustrations and potential delays due to the complexity of the normal tax code," she said.
Data showed that most taxpayers are turning to professionals to complete their forms. About 6 million more people filed electronically with the help of a pro and 3.2% fewer people did their own taxes compared with filings for 2021.
The IRS is mandated to issue any eligible refunds within 45 days of filing and pay interest on any delays. While returns are lower, in general, this year, the paid interest is higher than in previous years.
The IRS had contended with a backlog of more than 35 million returns that required manual processing due to COVID-19. Agency officials said this year that they are entering the new filing season with an unaddressed backlog of "several times" the typical level of 1 million unprocessed returns.
In January, then-IRS Commissioner Chuck Rettig warned the agency was facing "enormous challenges" in its operations due to severe levels of understaffing and budgetary constraints.
"IRS has experienced several challenges in recent years, including difficulty hiring workers to process returns, implementing notable tax law changes and managing the 2020 and 2021 filing seasons during the COVID-19 pandemic," a report from the Government Accountability Office read.
From 2010 through 2018, IRS funding was cut by 20% in inflation-adjusted dollars, resulting in the elimination of 22% of its staff.
If the current House leadership had its way, the situation could've been even worse. The House passed legislation in January to rescind funding outlined in last year's Inflation Reduction Act for 87,000 new IRS agents "because the government should be here to help you, not go after you," said Speaker Kevin McCarthy, R-Calif.
The Congressional Budget Office estimated the IRS would see its budget deficit hit $114 billion over the next 10 years if the bill passed. The White House condemned the bill as "reckless" and it failed to move.
"House Republicans are making clear that their top economic priority is to allow the rich and multibillion-dollar corporations to skip out on their taxes, while making life harder for ordinary, middle-class families that pay the taxes they owe," the White House said at the time.
More than so-called sin taxes or property taxes, it's individual income taxes that are the primary source of tax revenue, the Tax Foundation found. Half of the tax revenue comes from the state and local level, with the rest coming from the federal government.
Most other major Western economies lean heavily instead on consumption taxes, such as a sales tax.
The complexity of the normal tax code changes again for 2023. Tax brackets are changing to account for inflation and the standard deduction increases by $900 for individuals and by $1,800 for joint filers.
Other changes, meanwhile, could make filing easier, cheaper -- or even free. The Inflation Reduction Act funneled $15 million to the IRS for research into how a free-filing program would work and how much it would cost the federal government. A progress report is expected next month.
Taxpayers can file for an extension with the Internal Revenue Service, though that does nothing to delay the inevitable. Filing an extension gives you until October to settle the balance, but taxpayers are still accruing a burden over that period.
