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Despite falling inflation, many Americans are still struggling financially and will need their annual tax refund to cover the basics.
About 30% of Americans overall say they will rely on their tax refunds to make ends meet, according to a Credit Karma survey released Wednesday that surveyed roughly 1,000 U.S. adults in early December. The percentages were even higher for Gen Zers and millennials, with 40% and 46%, respectively, saying they would depend on the payment.
“Nearly three-quarters of Americans expect a tax refund this year, and for many, it will be their most important financial return of the year,” said Courtney Alev, consumer financial advocate at Credit Karma.
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While many Americans look forward to their annual tax refunds, the financial struggles may be greater this season after a year of increased spending.
Annual inflation fell to 6.5% in December, the US Bureau of Labor Statistics said Thursday. While prices are falling, annual inflation remains at the highest level in decades.
Meanwhile, the IRS warned taxpayers that refunds could be smaller in 2023 now that many pandemic-era tax breaks, such as larger child tax credits or more generous charitable deductions, have expired. Average compensation in 2022 was $3,176 as of Oct. 28, according to the IRS, up nearly 14% from $2,791 in 2021.
How to get a faster tax refund?
If you’re getting a bank for your tax refund, financial experts say there are several ways to avoid problems that could delay the process.
John Lloyd, a certified financial planner and owner of The Wealth Planner in Fort Worth, Texas, urges taxpayers to file electronically. “There is a saying in the tax world,” he said. “Anytime you send something to the IRS, you want to assume it’s going to get lost.”
While the agency usually issues tax refunds within 21 days, paper returns can take longer to process. “Taxpayers should prepare to file electronically and choose direct deposit for their tax refunds,” the IRS said in a news release.
Lloyd said errors on tax returns are another reason for processing delays. Incorrect personal information, such as your Social Security number or inconsistent information on tax forms, may take additional time to resolve.
The IRS announced Thursday that tax season opens for individual filers on Jan. 23.