Americans Getting More in Tax Refunds
About 75% of people who submitted their tax returns for 2010 are expecting to get a tax refund. The statistics of the percentage is no different from previous years. However, the average amount of tax refunds that the taxpayer gets has been growing steadily over the years. This has grown from the average in 1999 of $1,698.00 to that in 2009 of $3,003.00. This means that the IRS refunds have grown about 100% in only 10 years. There are several explanations for this growth in refund averages, which are listed below:
Changing Perceptions on Refunds
In the past, the idea of overpaying your taxes and waiting for a tax refund was seen as a bad deal, as it meant that you had basically advanced Uncle Sam with an interest-free loan. People worked to match their withholdings to ensure that they got the least possible tax refund. In fact, a survey carried out on the perception of tax refunds on taxpayers revealed that the older taxpayers, aged 50 years and above, still hold this notion and will always work to adjust their withholding to match actual taxes. However, the younger taxpayers seem to have a different attitude towards their tax refunds. Many of them will intentionally overpay their taxes so as to have a larger tax refund. The refund comes more like a bonus and the funds can be used for a specific thing such as set up an emergency fund, make an asset down-payment, or simply saved up for a vacation. Many young tax payers feel that the burdens of bills are high and saving up within the year turns out to be hard work. However, the IRS does the job in piling the overpayment of withholdings and refunding this in one paycheck, which can feel like a lump bonus to the taxpayer. The receiving of a healthy paycheck from the IRS seems preferable over receiving small funds distributed throughout a given tax year. This new trend of viewing tax refunds may have contributed to the increase in amount of tax refunds made.
Poorer Performing Markets
The stock exchange market and interest rates on various investments have performed dismally between 1999 and 2009 konsultan pajak jakarta. In fact, the stock market dipped in 3 of these 10 years and stagnated for the most part of the remaining years. These reduced returns on investments has worked to defer taxpayers from seeking to manage their tax withholdings better since there is nothing much you lose in terms of investment returns by waiting for a tax refund. Therefore, less people are keen to make withholding adjustments.
Job and Investment Losses
During the same period of 1999 to 2009, there have been more people who have lost returns on investments and lost jobs, especially in the 2001 and 2007 economic recessions. Therefore, the growth in refund averages may reflect the deductions on losses, unemployment benefits, and adjustments on reduced incomes.
New Tax Breaks
During the same period, there have been many tax breaks that have been introduced, such as the Bush tax cuts, among other tax credits (some of which were created in efforts to revamp the economy). These breaks include the home-buyer credits, American Opportunity Education credit, and larger child credits. Many people choose to apply these new tax credits in their returns, which leads to higher refund checks.
Cost of Withholding Adjustments
Another reason that could explain the raise in tax refunds is the complex process of calculating and making withholding tax adjustments. You will need to work with 3 worksheets and 2 tax tables on the W-4 to make the correct adjustments on your withholdings. You will then need to forward your W-4 to your employer so as to have them update the changes. Many people find this process a challenge and would rather do nothing about their tax withholdings. However, on the flip side, most tax preparers provide free help in preparing the W-4 to make tax withholding adjustments. You can therefore request the assistance of your tax preparer with your W-4.