As the tax filing deadline closes in (April 18th), CivicScience conducted its annual look at tax trends and how Americans plan to use their refunds. What’s changed in 2022?
First, survey findings indicate this year may bring less relief in the form of a refund. Compared to last year, Americans are slightly more likely to say they expect to owe money this year.
A closer look shows that more Americans were taken by surprise when filing their taxes this year. Slightly more employed adults unexpectedly owed money or found they owed more money than anticipated, compared to last year.
Refunds are also more likely to be a let down. Although the IRS reports that the average tax refund is nearly 13% larger than last year’s ($3,337), survey results show that 18% of filers received less money back than they were expecting, which represents a significant (38%) increase from 2021.
Although data indicate that inflation and record gas prices may influence how Americans spend their tax refunds, those who receive a refund are more likely to spend it on goods and services this year.
Last year (and the year before that), paying down debt and saving were top priorities. This year, more consumers say they’ll use their refund to go on vacation and to go shopping, and fewer people will use it to pay off debt and invest in home improvements.
These changes are largely being driven by Gen Z and Millennial adults, who are less concerned with paying off debt and saving this year. Millennials in particular are nearly twice as likely to use their refund for a vacation and nearly three times as likely to go shopping. Baby Boomers, on the other hand, are much more likely to put their refunds toward savings this year.
The strong increase in both experiential and retail spending coincides with waning COVID-19 related concerns and increasing comfort being in public, including attending events and travel.
It also coincides with increasing stress levels and a drop in overall emotional well-being, which could be causing more people to rethink their priorities. Compared to this time last year, a greater percentage of Americans say they value time more than money.
It’s likely these sentiments are driving how people will use their refunds this year, more than any improvement in personal financial outlook. In fact, survey results show increasing feelings of discomfort with debt and other financial stressors.
Yet, refunds may not be pumped back into the economy right away. Consumers and businesses looking forward to refund spending may have to wait longer than usual, as the IRS is backlogged with returns.
A look at tax preparation methods shows nearly half of tax filers are preparing their taxes on their own this year, while 39% are using a personal accountant or online tax prep service.
Among self-filers, most are using a purchased tax software or a free software or online service (e.g., Turbo Tax Free Edition, IRS Free File). However, nearly one-quarter are sending their taxes by mail, which could contribute to delayed refunds. The IRS notes that refund delays are less likely to occur with e-file.
Interested in more tax season info? CivicScience clients get in-depth reports delivered weekly. Schedule a demo today.