The Internal Revenue Service (IRS) is addressing growing concerns among federal taxpayers as recent data indicates significant reductions in tax refunds for the 2025 fiscal year. According to statistics released on February 14, 2025, the average tax refund has seen a steep decline of nearly 33% compared to the same period last year. The average refund has dropped to $2,169 from $3,207, prompting worries among many individuals who have yet to file their taxes.
So far this year, the IRS has issued approximately 13.6 million refunds, which is considerably lower than the 20.8 million refunds issued by this time last year. With filing season well underway, numbers are likely to fluctuate as more data is reported. The agency states these trends could balance out once taxpayers who are eligible for credits begin claiming their refunds.
Taxpayers claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) will experience delays, as stipulated by the PATH Act. The IRS noted, “Taxpayers who claimed the credits should have already begun receiving their refunds and those numbers are expected to be included in the next data report.” This delay can lead to confusion and frustration among affected filers.
Many individuals may wonder, “Why am I receiving less money back this year?” and the IRS has provided multiple explanations for these reductions. Among the most common reasons for withholding refunds are unpaid federal or state income taxes, defaulted student loans, or outstanding child support. If any of these debts exist, the IRS can seize part or all of the tax refund to settle the owed amounts. According to Investopedia, “If you notice a deduction in your return or your return has been withheld, it could be because: - You owe federal income taxes - You owe state income taxes - You owe child support.”
This year, filers are also taking longer to submit their returns, with the IRS processing around 32.8 million out of 33 million returns received — marking about a 5% decrease compared to last year. Many taxpayers are facing heightened scrutiny for clerical errors, which could lead to reductions as well, as noted by the IRS. Minor mistakes or miscalculations can lead to significant discrepancies when refunds are calculated.
Another contributing factor could be changes to eligibility for tax credits and deductions. For example, if children turn 17 within the tax year 2024, families will no longer qualify for the Child Tax Credit for those dependents, potentially reducing their refund amounts significantly.
Despite the disheartening news, not all is bleak. The IRS assures taxpayers there are scenarios where refunds may increase due to corrections or re-evaluations of submitted claims. The IRS emphasizes, “Factors could decrease the amount of your tax refund include: - Math errors or other mistakes - Delinquent federal taxes - Unpaid debts such as state income taxes.” Taxpayers can check the status of their refunds using the IRS’s “Where’s My Refund” tool shortly after filing their returns.
The approaching deadline and the potential shifts in refund amounts are stressful for many filers. The IRS staffing changes, particularly layoffs of thousands of probationary workers, have contributed to some service delays and processing slowdowns. With more individuals needing to navigate these changes, it’s important for taxpayers to keep accurate records and double-check their filings before submission.
All these factors combined create uncertainty this tax season, but knowledge and preparation can aid taxpayers in optimizing their refunds and managing expectations. It’s recommended to communicate directly with the IRS or local tax authorities for any specific inquiries or concerns.