According to the latest weekly data from the Internal Revenue Service, income tax refunds are 14% lower than last year. The only bright spot in the report was that overall agency operations seem to have improved somewhat.
I’ll believe it when I see it.
The average refund processed was $1,997 on returns processed through February 10th. Last year’s average return through the same period was $2,323. There are many reasons for this change.
The Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Credit (CDCC) have all returned to their pre-covid levels. The CTC is now $2,000 per qualifying child, down from $3,600.
The EITC with no children is only $500 this year as compared to last year’s credit of $1,502. The CDCC is down to $2,100 this year. Last year it maxed out at $8,000 per dependent.
In addition, the above-the-line charitable deduction and the mortgage insurance premium deduction are also no longer deductible.
At the individual level, the C-19 free ride just officially ended. Your personal returns are going to look entirely different this year.
Don’t expect the same refund. It will probably be much less this year.
Let me leave you with this.
Recent economic news has sent shockwaves through the investment community. Our economy is much stronger than many had predicted.
This is causing many economists to think that the Federal Reserve Bank will complete a more aggressive interest increase of half a point at their next meeting. Many had thought that the Fed would only do one or maybe two additional quarter point rate increases this year and then let nature take its course.
Most had expected us to have what many call a “soft landing” in the economy. Last week’s numbers tell us that there may be no landing at all.
Inflation readings showed that both consumer prices and producer prices had risen more than expected. In January, retail sales posted its largest increase in the past two years. That number had declined in both November and December of last year.
As you know, the labor market remains strong with unemployment recently recorded at a 53 year low. All of this tells the story of an economy burning hot rather than cooling down.
The Fed needs things to slow down to tame inflation.
Even with the Fed increasing rates as much as they did last year, our economy continues to chug along. As such, they’ll probably have no choice but to more aggressively increase the Fed Funds rate.
Many had thought that we were through the worst of it. These newest economic indicators tell us that we still have a long way to go.
Be vigilant. Be ready. We aren’t out of the woods quite yet.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, M&A Due Diligence, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Accounting Solutions Ltd.
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.