The Average Tax Refund Is Down 8.4%, But That May Change

During the first week of tax season, taxpayers received smaller refunds by an average of $170.
The Average Tax Refund Is Down 8.4%

In 2018, the IRS issued nearly 112 million refund checks to the tune of more than $324 billion. As the new tax season gets underway, the IRS has reported the average tax refund amount is down $170 ($1,865), a drop of 8.4% compared to the average refund ($2,035) during the first week of the 2018 filing season.

But that drop is largely attributed to the historical government shutdown, during which nearly 7 out of 8 IRS employees were furloughed. As the tax agency struggles to recover from the shutdown and get back on track processing income tax returns, the first week of the 2019 filing season, which ended Feb. 1, saw the total number of refunds issued drop by 24.3% to about 4.67 million compared to the nearly 6.17 million refunds issued in the same period last year. The IRS processed 25.8% fewer returns so far during the first week of tax filing last year.

2019 Filing Season Statistics

Cumulative statistics comparing 02/02/2018 and 02/01/2019

TOTAL REFUNDS20182019% Change
Amount$12.560 Billion$8.713 Billion-30.6
Average Refund$2,035$1,865-8.4
Source: IRS

The new tax reform

With tax season just getting underway, there’s no consensus on whether tax filers will be getting higher refunds or wind up paying more in taxes. The tax reform, which was implemented last year, saw the IRS make sweeping changes to its withholding tables, which reflect the amounts the federal government recommends tax filers should withhold for federal income taxes.

According to a report by the Government Accountability Office, the number of tax filers who receive refunds is likely to drop for the 2019 tax filing season. Even worse, more Americans will owe money this year because their employers did not withhold enough from their paychecks following the implementation of tax reform.

The GAO report found 21%, or 30 million taxpayers, received bigger paychecks as a result of under-withholding in 2018. While tens of millions of taxpayers enjoyed fatter paychecks, that simply means come April, they will likely owe the IRS money.

A smaller refund doesn’t necessarily mean taxpayers paid more in taxes as a result of tax reform. According to a Tax Policy Center analysis, 80% of filers received a tax cut, which showed up in the form of bigger paychecks for most Americans, and only about 5% paid more in federal income taxes.

Wall Street economists, however, anticipate an increase in tax refunds this year as a result of the tax law, with some estimating as much as $62 billion in additional tax refunds thanks to the tax reform, according to The New York Times. But until all the 2018 tax returns are filed, experts agree this year’s tax season remains uncertain for a vast majority of tax filers.

Robert Carnevale is a personal finance news writer. When he's not writing about money, he's covering the tech circuit and penning novels.