The average income tax refund is up nearly 10% from a year ago, reflecting tax credits included in last year’s economic stimulus package, according to IRS Commissioner Douglas Shulman. Vice President Biden is expected to announce the increase Monday as part of a month-long effort to promote tax benefits available through the Recovery Act of 2009.
Through March 12, the average tax refund was a record $3,036, up $266 from the same period a year earlier, Shulman said in a statement.
“The Recovery Act is a major factor behind these larger, record refunds,” Shulman said. “About half of all Americans haven’t filed their taxes yet, so we urge them to look carefully at these Recovery provisions.” Some 69 million individual tax returns were filed through March 13, according to the IRS.
The Recovery Act provided a tax credit of $400 for workers, or $800 for married couples. Most workers who have taxes withheld from their paychecks received the credit through an adjustment in their withholding. But those who didn’t receive the full credit through withholding will receive the balance in their refunds.
Other provisions in the Recovery Act that could boost refunds include:
• A $2,500 American Opportunity Credit for qualified college expenses.
• A tax credit of up to $8,000 for first-time home buyers. Congress expanded this credit in November to provide a $6,500 credit for repeat buyers.
• A deduction for state and local taxes on new vehicle purchases.
• An increase in the Earned Income Tax Credit and the Child Tax Credit.
• A tax break for unemployment benefits. Ordinarily, jobless benefits are taxable, but under the Recovery Act, the first $2,500 in unemployment benefits received in 2009 is tax-free.
The new tax credits have created confusion among some taxpayers. More than 2 million returns filed this year contained an error in connection with the Making Work Pay credit, according to the IRS. The IRS will recalculate the credit for taxpayers who fail to claim it, but that could delay their refunds.
The White House is launching a tool on its website to help taxpayers calculate their Recovery Act benefits, at www.whitehouse.gov/recovery.
Via USA Today