Jit 2022 tax season is well underway, and while federal filings aren’t officially due until April 18, there are additional reasons this year for file the taxes early — especially if you’re expecting a refund.
Thanks to a perfect storm of economic factors, those tax refund checks are going to be more important than ever to a lot of people.
Americans are struggling with the highest rate of inflation for decades, and wages, though rising for many, are not rising fast enough to keep pace. So people cut their spending lots of big purchases — above all, the cars, which have seen prices are skyrocketing – and hoping that a big tax refund will help relieve the pain.
A new report from Capital One found that rising prices prompted 38% of Americans to cut back on their spending habits, particularly when it comes to discretionary spending like dining out and shopping. On top of that, about a quarter of Americans have been unable to pay at least one bill in the past month. Amid all this financial uncertainty, about half of middle-income people (households earning between $25,000 and $100,000 a year) and 57% of low-income people (households earning less than $25,000 a year) said their tax refunds would be very important or moderately important to their financial health in 2022.
According to a National Retail Federation survey59% of Americans expect to get a tax refund in 2022. As for what people will do with their refunds, there are notable increases this year for those who say they’ll pay off debt or just save money – which are the two most popular ways to use tax refunds.
Beginning with the week ending February 25 (the most recent Data available), the IRS had processed more than 43 million individual tax returns. The agency sent out some 29.7 million refunds with a cumulative value of $103 billion. So far, the average 2021 refund check is $3,473.
Tax refunds come at the right time
If you haven’t filed your tax returns yet, it’s a good idea to do so as soon as possible. The IRS is facing serious arrears and personnel issues it could delay your refund. If you need more convincing, here are a few reasons why tax refund checks come at a critical time for many families in 2022.
Inflation
Prices rose at an annual rate of 7.5% in January – the biggest jump since 1982. Inflation data for February will be released this week, and it’s a safe bet that prices have risen further on last month, in part due to the ongoing conflict in Ukraine.
Soaring gas prices
Rising crude oil prices are fueling a huge spike in gasoline prices (which is a major driver of this exorbitant global inflation rate). Nationally, prices hit a record high of $4.25 a gallon this week, and some cities are already seeing average prices above $5 per gallon.
Dollar Scholar
Still learning the basics of personal finance? Let us teach you the key financial lessons you MUST know. Get helpful tips, expert advice, and cute animals delivered to your inbox every week.
Expanded child tax credit expires
The Biden administration’s U.S. bailout authorized a major expansion of the child tax credit (both in terms of maximum credit amount and credit eligibility requirements). The bailout also allowed eligible families to receive the first half of the expanded credit of six monthly advance payments, the last of which affected bank accounts in December. Expansion the credit has not been extended for 2022. So while taxpayers can claim the rest of what’s owed to them when they file their 2021 taxes this spring, the regular monthly payments that were a lifeline for many families aren’t going to reappear anytime soon.
Reimbursement of student loan repayments
Federal student loan repayments, which have been repeatedly frozen by the federal government, are expected to resumed on May 1, 2022despite pressure from progressive activists for the payment break to be extended or made permanent.
More money :
7 big tax changes that could affect your return – and the size of your refund
Cars, refrigerators and other purchases that Americans are putting off because of inflation
© Copyright 2021 Advertising Practitioners, LLC. All rights reserved.
This article originally appeared on Money.com and may contain affiliate links for which Money receives compensation. The views expressed in this article are those of the author alone, not those of any third-party entity, and have not been reviewed, endorsed, or otherwise endorsed. Offers may be subject to change without notice. For more information, read Full Money Disclaimer.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
