Even as the 2023 tax season rolls on more smoothly than expected, the IRS has increased the number of Child Tax Credits and returns processed. And it has also meant more refunds amount being processed, including the Child Tax Credit.
By February 10, the IRS had processed a little over 26.6M income tax returns. This compares favorably to the 23.4M processed over the same period last season. This is an increase of 13.6%, revealing filing statistics for the week ending February 10, 2023, as revealed by the 2023 filing season figures for the week ending February 10 this year.
Refund Numbers Are Up But the Average Refund Amount Slides Down
The number of Child Tax Credits that were e-filed has also seen a significant increase. Over 94% of the 28.8M income tax returns received as of February 10 were filed electronically, which is one of the important reasons for the quicker processing of the returns.
E-filed Child Tax Credit refunds normally get issued quite fast, normally within 3 weeks. Accurate and complete paper returns that have a refund due on the other hand take six to eight weeks for the whole process to be completed.
The e-file numbers for tax pros have also seen a significant increase of 11% year-on-year as compared to the same period in 2022. For filers, that number has increased by 3.4%.
The average refund amount is quite down this year even though the refund amounts have gone down significantly. The IRS sent out over 13M income tax refunds. That is 48.4% over the 8.9M income tax refunds that were sent out in the tax season 2022.
Discontinuance Of Child Tax Credit Main Major Reason For The Lower Refund Rate
But the average refund amount that taxpayers have received has gone down significantly this year. The average amount this year stands at $1,997 for tax returns that were processed by February 10. This compares unfavorably with the average of $2,323 processed during the same period a year before. It is a significant reduction of 14% over last year.
The reason for the lower average refund amount includes a significant pre-pandemic amount. Other than the EITC and Child and Dependent Care Credit, it was the discontinuance of the Child Tax Credit stimulus check that affected the refunds most significantly.
Other than that, the elimination of above-the-line charitable deductions could further affect the refunds received by the taxpayers.
The IRS has also reported a reduction in traffic to the IRS website compared to 2022. Many say that the primary reason for this reduction in traffic is that taxpayers and tax pros now find it convenient to communicate by phone with representatives of the IRS to get their queries answered.
IRS spokespersons say that this season, there has been a significant increase in calls to the taxpayer phone line and the Practitioner Priority hotline, which are answered by service representatives within the IRS. Customer service reps of the IRS have answered 93% of the phone calls when automated phone calls, or chatbots, are included. In the corresponding period last year, the IRS succeeded in getting through only 13% of the cases.
It is still too early in the tax season of 2023. but the beginning has been good. The IRS said that they expect around 168M individual income tax returns to be filed this season. And a lot remains to be done.
New Jersey Child Tax Credit Poised For Expansion
As high inflation continues to assail residents, New Jersey’s new child tax credit is poised for expansion. It could include a doubling of the maximum credit amount to $1,000 for a child.
Thousands of residents of New Jersey will be in line for the first time in 2023 for a state-level CTC payment of up to $500 a child against their income tax return for New Jersey state under a freshly established break.
And this week, the New Jersey Policy Perspective, a think tank that strongly backed the credit in 2022, released a report that called for increasing the maximum limit for the child tax credit from $500 to $1,000 per child.
The non-profit has also recommended increasing the age limit of eligible children claiming the credit from children up to the age of 6 to those under 12 years.
The think tank’s proposal also contains suggestions that the credit is restricted to families with combined earnings of $80,000 or less. This has been done to keep the tax breaks targeted to those who need the most relief and are in danger of remaining in poverty.
Inflation has hit the hardest when it comes to food and housing cost. These are the areas that have eaten up a family’s budget. It was important to support families at that stage with costs, and in the present environment of incessant rise in costs, the child tax credit payments and its expansion has become impertinent.
The Policy Perspective report comes weeks before Governor Phil Murphy, a two-term Democrat, was due to present a new annual budget for Trenton lawmakers.
The months that follow the budget message of the governor are normally a time of changes to state fiscal policies, and they are considered and reviewed by lawmakers in the run-up to the July start of the fiscal year of the state.
All 120 seats in the state are up for election this year and there are rising concerns about affordability and taxes. They have dominated center stage as a period of high inflation assails amidst a period of the global pandemic.
It is unclear if the proposal for the expansion of the New Jersey state child tax credit will move into the final budget. But Chen is hopeful that both members of the state administration and lawmakers from the Murphy Administration will examine this case and make some adjustments.
Chen said he was hopeful that in this session and the upcoming budget process, the administration will be capable of providing extra relief for families, and they will consider the expansion of the child tax credit as it was passed with overwhelming and bipartisan support during the previous cycle of the budget.
