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Today’s entry: The entire tax industry, and seemingly news reporting as well, is built around tax refunds. I prepare my own taxes using Turbo Tax and even though I end up almost always having to pay more on Tax Day, even they make you click through a bunch of things that talk about your tax refund! How many people end up getting a refund compared to those who pay more when they file. It’s got to be a much bigger number than we’re led to believe.
Bottom Line: Of the many ways to illustrate the pervasiveness of financial literacy issues, this might be the best example. While I understand why people who typically receive refunds are excited about receiving them, as there's nothing fun about paying even more on Tax Day, it’s less than ideal financial management. I’ll come back to that point in a minute, first I’ll answer your question. Believe it or not, the IRS hasn’t completed processing all last year’s tax filings, so we don’t have final stats from last year’s tax season just yet.
In 2020, 74% of tax filers received refunds compared to 25% who owed more upon filing, Also, for those receiving refunds, the average refund was $3,709. So yeah, you’re not that unusual. A quarter of all Americans are in a similar boat as you and that is an awful lot of people for the conversation, and tax filing software as you pointed out, to seemingly all be pointed in one direction.
What’s more, in Florida we’re even less likely to receive refunds. In Florida, 3% fewer tax filers receive refunds compared to the national average. That means in our state the breakout is approximately 71% who receive refunds compared to about 28% who pay more when they file. Floridians are the 11th least likely to receive a refund, which as mentioned, is actually positive that a greater percentage of Floridians are more effectively managing their tax deductions than the country overall.
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