"For a lot of taxpayers, this might be the most pleasant filing season in years," Grassley said."Paying less taxes and getting a bigger refund are nice ways to approach April 15."
Grassley said an Internal Revenue Service analysis, quoted in Thursday's USA TODAY, showed the average refund so far this year was up 12 percent from the same time period last year. The article attributed the higher refunds to various elements of the tax cuts approved last year: the increased per-child tax credit, including special refunds for lower-income taxpayers; lower rates; and a rate reduction credit.
The Thursday, March 7, USA TODAY story follows.
Tax cut gives refunds a boost
By Thomas A. Fogarty, USA TODAY
Tax-cut legislation enacted in June is paying a welcome dividend to tax filers: sky-high refunds.
The Internal Revenue Service says the average refund through last Friday totaled $2,091, up 12% from the comparable period in 2001.
The refunds already have pumped a well-timed $74 billion into a struggling U.S. economy, or nearly double the sum mailed as a special rebate last year to millions of taxpayers. More than five weeks remain until the April 15 filing deadline.
Average refunds have been trending upward for the past decade, but the increase this year is exceptionally large. Among the reasons:
- Increased child credit. The 2001 law boosts to $600 from $500 the per-child credit. It also makes more families eligible to use the tax-refund process to claim the money even when the credit exceeds their tax liability.
- Lower rates. The new law shaved a half-point off the former rates of 28%, 31%, 36% and 39.6%. Midyear changes in wage-withholding tables didn't fully offset the effect of the rate changes.
- Rate reduction credit. Starting next tax season, IRS tax tables will build in a 10% rate for the first $12,000 of income for married filers and the first $6,000 for singles. The income had been taxed at 15%.
In fashioning the tax cut, Congress decided to handle the matter for 2001 by mailing special rebates -- advance refunds, actually -- to about 85 million Americans.
Because eligibility for those special checks was based on information from earlier tax returns, many who received no check, or a check for less than the maximum, are using their returns this season to claim the benefit. The result is higher refunds.
Since 1992, the average refund has risen 5.5% annually. Don Roberts of the IRS says when tax filing ends this year, the average almost certainly will decline from midseason, but it will be well above last year's average, $1,743.
Early filers tend to be motivated by their waiting refunds. They also tend to have simpler returns.
Millions use their tax withholding as a forced savings plan with a big payoff every spring. In recent years, about 70% of filers receive refunds.
Roberts says taxpayers would be better off lowering their wage withholding rather than giving the government the equivalent of an interest-free loan.