The Internal Revenue Service (IRS) has commenced the distribution of tax refunds for the 2024 tax season, bringing financial relief to millions of Americans, particularly those eligible for the Earned Income Tax Credit (EITC). This year, taxpayers who qualify for the EITC can claim up to $7,430, a significant boon for families and individuals with low to moderate incomes seeking to mitigate their tax burdens and potentially secure refunds even in the absence of tax liabilities.
Despite the substantial benefits of the EITC, the IRS has identified a concerning trend: a significant portion of eligible taxpayers remain unaware of the credit, consequently missing out on the opportunity. According to the IRS, approximately 80% of eligible taxpayers claim the EITC, leaving "millions of workers" each year without the financial advantage it offers. The Center on Budget and Policy Priorities highlighted the EITC's impact, noting its role in elevating 5.6 million individuals, including nearly 3 million children, above the poverty line in 2018 alone.
Eligibility for the EITC hinges on several criteria, including employment and earning an income under $63,398, possessing a valid Social Security number, and being a U.S. citizen, among other conditions. The amount of EITC a taxpayer can receive varies based on the number of dependents and their tax filing status, necessitating a tax return filing to qualify for the program.
The IRS's latest data reveals that around 23 million workers and families benefitted from approximately $57 billion in EITC for the tax year 2022, with an average payout of about $2,541. Those eligible for this year's refund are advised to opt for "direct deposit" as the collection method to expedite the receipt of their checks, although applying for the EITC may delay the issuance of refunds.
In a broader context, the IRS has reported an increase in the average tax refund amount this year, marking a potential uplift for many Americans. As of February 16, the average refund stands at $3,207, a 2.1% rise from the previous year. This uptick reverses the trend from 2023, when refunds dipped by 3% due to the expiration of pandemic tax benefits, exacerbating the financial strain on households already grappling with inflation.
The IRS has made adjustments to several provisions for inflation for the 2023 tax year, including an approximately 7% increase in the standard deduction and tax brackets. These changes are likely to result in larger refunds for workers whose pay did not keep pace with inflation last year.
However, the potential for a larger refund in 2024 is contingent on individual circumstances, such as income changes, life events, and other factors that could influence tax liabilities. Taxpayers considering side gigs or those experiencing significant life changes should be particularly mindful of how these may affect their tax situations.
Most taxpayers who file electronically can anticipate receiving their refunds within 21 days, according to the IRS. The agency encourages taxpayers to use the "Where's My Refund?" tool on its website or the IRS2Go app to check the status of their refunds, which is updated once daily.
As the tax season progresses, with an expected 146 million individual tax returns, the IRS's efforts to distribute refunds efficiently and inform taxpayers of their eligibility for various credits, like the EITC, remain crucial components of the tax filing process.
