Experts trying to predict how the first tax season under the new law will pan out have come to varying conclusions. Some expect larger refunds that will bolster the economy through increased spending and consumer confidence. Others estimate that on average, taxpayers have already received their tax cut through changes in withholding, and may actually receive smaller refunds this year than in the past. While it’s still too early to draw conclusions, IRS statistics for the first week of the filing season offer little support for optimism.
Returns filed. Taxpayers filed just over 16 million returns in that period. That’s a decline of more than 12% from the 18.3 million filed in the same period a year earlier. We shouldn’t be surprised if questions about how the new law applies, or about how to file on the redesigned Form 1040, may have led some of of the early birds to take more time than usual.
Returns processed. In a normal year, we would expect the IRS to have processed nearly all the returns it received in this early period. Not so in a filing season that began under the cloud of a government shutdown. The IRS processed millions fewer returns than it received, resulting in an overall decline of more than 25% in the number of returns processed in the first week of the filing season.
Refunds. Sooner or later, the numbers for returns filed and processed will catch up with the previous year’s statistics. And we may still see a boost in the size of refunds. The early numbers suggest otherwise. Returns in the first week showed an average refund of $1,865, a decline of more than 8% from a year earlier. Time will tell whether this figure indicates the prevailing outcome will be disappointment.
Overall. With fewer returns being filed, and a smaller percentage of them being processed, and the average refund being smaller, the total number of dollars paid out takes a triple hit. A year earlier, taxpayers received more than $12.5 billion in the first week. This year’s figure is $8.7 billion, about 30% less.