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As Tax Filing Deadline Approaches, Americans Anticipate Refunds Amidst Early Filings

According to a report by WWD, over 50% of Americans are filing their taxes earlier this year, eager to expedite the refund process.
Cover Image Source: Tax Season | Pexel | Photo by Alexander Suhorucov
Cover Image Source: Tax Season | Pexel | Photo by Alexander Suhorucov

As the tax filing deadline of April 15 looms closer, Americans are preparing to receive and allocate their tax refunds. According to a report by WWD, over half of Americans are filing their taxes earlier this year, eager to expedite the refund process. The Internal Revenue Service (IRS) has already disbursed a staggering $135 billion in tax refunds, with an average refund of just over $3,000.

Cover Image Source: Pexels|Photo by Nataliya Vaitkevich
Image Source: Pexels | Photo by Nataliya Vaitkevich

Despite the trend of early filers, data from Trustpilot reveals a concerning statistic: 53 percent of Americans aged 18-24 have yet to file their taxes. Among them, one in ten respondents express apprehension about their ability to afford owed taxes. For this demographic, the prospect of a meager tax return poses significant financial challenges, with potential repercussions on bill payments, household necessities, and loan obligations.

A survey conducted by Qualtrics sheds light on the diverse financial behaviors surrounding tax refunds. Astonishingly, a quarter of American taxpayers view their refunds as "free money," earmarked for discretionary spending rather than financial prudence. Clothing, electronics, and leisure activities rank high on the list of indulgences funded by tax refunds.

Notably, younger demographics exhibit a penchant for splurging, with 39 percent of Gen Z and Millennials admitting to such plans. This tendency, according to the report, is linked to the perception of tax refunds as windfalls rather than financial assets. Among taxpaying filers who received refunds, a substantial portion has already spent some or all of it, contributing to the cycle of consumerism.

Tax forms | Getty Images | Photo by Justin Sullivan
Image Source: Tax forms | Getty Images | Photo by Justin Sullivan

However, amidst the allure of discretionary spending, a significant portion of taxpayers prioritize financial responsibility. Forty-one percent of refund recipients allocate their funds to savings, while 27 percent opt to pay down debts, reflecting a commitment to long-term financial stability.

Moreover, the rising cost of living emerges as a central theme in taxpayers' reliance on refunds. With 56 percent attributing their dependence on tax refunds to the escalating expenses of everyday life, it is evident that refunds serve as a crucial lifeline for many households.

"Refunds are often the largest windfall for Americans and many rely on this annual infusion of cash to make ends meet, pay off debt, or kick off savings for the year ahead," says Courtney Alev, consumer financial advocate and Head of Tax at Intuit Credit Karma.

Unsplash | Photo by Markus Winkler
Image Source: Unsplash | Photo by Markus Winkler

"Americans’ dependency on refunds may be heightened this year as many grapple with the increased cost of living, which has led many Americans to live paycheck to paycheck. Whether you’re expecting a refund this year or you think you might owe money, my number one tip is to make a plan," Alev suggests.

"There are tons of online tools you can use to estimate your refund, which will give you an idea of how much you might receive, or how much you might owe. From there, you can make a plan for how you’re going to use that money or how you’re going to pay for your tax bill," she adds.

While the temptation to indulge in discretionary spending may be strong, prudent financial management dictates a balanced approach. By allocating refunds towards savings, debt reduction, or essential expenses, individuals can fortify their financial resilience and pave the way for long-term prosperity.