With tax day upon us, thanks to this year’s filing deadline extension, Americans everywhere have finally completed their yearly obligation, counted every deduction, and finished crossing their fingers, hoping for a larger than expected refund.
Back in February, the IRS first announced that it would not be extending the filing deadline this year, and 71% of Americans agreed with that decision (in a reversal, the deadline was extended in mid-March). This trend holds up in the data which show 65% of tax filers perform their civic duty between January and March. In fact, only 17% of filers took advantage of the tax filing extension this year.
Perhaps surprisingly, the youngest filers were the least likely to take advantage of the extension, which may just be a reflection of their taxes being much less complicated than those with families, houses, investments, and the like. On the other hand, those with higher income are more likely than lower-income groups to file in March, April, and May.
How Are People Doing Their Taxes?
It turns out that a personal accountant is the most popular way to file taxes, though that is followed closely by those using an online service.
When we look at these responses by age, we see some interesting breakdowns.
For instance, those 18 to 24 are by far more likely than other age group to do their taxes by hand. But the likely simplicity of a young person’s tax situation doesn’t fully explain this preference for doing taxes by hand, nor does the likelihood that they wouldn’t be able to pay for other methods of filing, such as with an online service or accountant. Because when we look at income, some other interesting trends emerge.
Those making under $50K a year are just as likely to do their taxes by hand as their counterparts earning $100K or more. They are also far more likely than others to utilize an online service.
What About Refunds
The good news is that most people (60%) receive about as much money as they expect to receive every year. And just more than one-quarter (27%) expect less than they get, which must make filing taxes a nice bonus every year.
This year, however, the most common use of tax refund money is to “put it aside” at 28% up from 25% in February of last year. Interestingly, last year, the biggest response was “pay off debt” at 33%. This may demonstrate the trend over the pandemic that many people paid off significant amounts of credit card debt. And while the economic outlook is better now that over the course of most of the last year, there is still significant uncertainty around what the short term may hold.
This economic uncertainty trickles across age groups in various ways. Those 18 to 24 are by far the most likely to invest their refunds, while those 55 and older are the most likely to put their refunds aside. Meanwhile, those between the ages of 25 and 54 are still most likely to pay off debt.
It’s not just the young looking to invest their tax returns. Those making more than $100K are more interested than others in trusting the markets to grow their refunds. Overall however, each income group is most interested in putting their refunds aside, perhaps for savings, or perhaps for a rainy day.
Tax Policy? Effects Cut Evenly
Just over a third of respondents (34%) report not really being affected by changing federal tax policies over the last few years. This percentage sits right in between the slightly larger (37%) percentage of respondents who report receiving less in their tax refunds, and the slightly lower percentage (29%) of people who report receiving more.
As the last of tax refunds issue leading to Monday’s deadline, CivicScience will check in on what the data say about how they are spent, or not.