Tax season is upon us.
If you're hoping to use your refund check to pay down some debt, pad your pockets amid inflation, or save for a rainy day, the Internal Revenue Service says it's issuing bigger tax refunds this year compared to last, with an increase of about 2.1 percent.
With the latest Federal Trade Commission crackdowns on deceptive "free" services advertised by self-service filing sites like TurboTax and H&R Block, experts say an already stressful task for many can become even worse.
"If you get a letter in the mail from the IRS, it's kinda like the cops with the lights on behind you," says Jeromy Bourque, a Lafayette CPA currently working his 15th tax season. "You're not speeding, you're not doing anything wrong, but you feel like you're guilty immediately."
The Lafayette Economic Development Authority reports more than 600,000 people working in the trade market and more than one million tourists visiting those local shops each year. For those making up the backbone of the small business sector, the finer details of tax filing can be a lot to keep track of, and sometimes, are placed on the back burner.
"Small businesses struggle," Bourque tells me. "If you have a small business with three employees and one calls out sick, you're out of 33% of your workforce so sometimes they get behind on bookkeeping, accounting or record-keeping and so sometimes we don't get information [to file] until July."
Another thing small business owners have to deal with themselves: social security and planning for retirement.
"When you're a W-2 employee, your social security and medicare are getting taken out of your check, but it's only half, your employer's paying the other half for a total of 15.3 percent," Bourque says. "When you're self-employed you're paying the whole 15.3 percent, so in addition to paying income taxes, you're paying an additional 15.3 percent, so this boost is nominal at best for those folks."
The latest average refunds are being recorded around $3,200 compared to just more than $3,100 a year ago. The heftier average refund is an about-face from the previous season's refund dip thanks to the expiration of pandemic-era tax benefits.
Along with this, the IRS is adjusting many provisions for inflation, pushing the standard deduction and tax brackets about seven percent higher for the 2023 tax year we are all now filing for. While these slightly bigger refunds may seem stellar, Bourque says all that glitters is not gold.
"We do have some looming bills out in Congress that might be passed and retroactively applied to 2023's tax season, so I think we're still waiting on a lot of data to come through and a lot of decisions to be made before we can say this is a better tax season for everyone."
With just under seven weeks until Tax Day April 15th, IRS data could fluctuate, but so far the agency reports receiving about 35 million tax returns, just a portion of the 146 million expected by the end of tax season alone.
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