Tax Season: Why Many Taxpayers Wait to File
It’s that time of year again – tax season. For many Americans, the thought of filing taxes can be daunting. Some taxpayers file their taxes as soon as possible, especially if they are expecting a refund. However, there are others who wait until the last minute to file for various reasons.
According to Mark Baran, managing director at financial firm CBIZ Marks Paneth, one of the top reasons Americans procrastinate on taxes is because they know they won’t be getting a refund. Additionally, many taxpayers opt to file for an extension, which extends the federal filing deadline by six months to October 15th. While this provides more time to file, federal taxes owed are still typically due on April 15th.
“A lot of high-net-worth clients will file extensions because they’re still waiting for tax forms such as Schedule K-1 for pass-through business income,” Baran explained. This means that the data from the IRS may not accurately reflect the returns that will ultimately be filed by October.
As of December 23rd, the average tax refund for 2023 was $3,167, slightly lower than the $3,252 average in 2022, according to the IRS.
Relying on a Tax Refund
Interestingly, a survey from LendingTree published in March revealed that 40% of taxpayers are relying on a refund this tax season, up from 36% last year. Jacob Channel, LendingTree’s senior economist, attributed this increase to inflation.
“Inflation is down significantly from its 9.1% peak in 2022, but it remains above the Federal Reserve’s 2% target,” Channel said. The consumer price index rose 3.2% in February compared to one year ago, according to the Bureau of Labor Statistics.
So, whether you file your taxes early or wait until the last minute, it’s clear that tax season can be a stressful time for many Americans. Regardless of when you file, it’s important to stay informed about any changes in the tax code and seek advice from a financial professional if needed.
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