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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. The biggest tax question on most people’s minds as filing season gets underway is whether they’ll get a refund or owe the IRS money. The average tax refund last filing season
The average tax return for the 2020 tax year was $2,827, a 13.24 percent increase from the previous year. Nearly 240.2 million returns were filed in 2021, amounting to $736.2 billion. There have been 125.3 million refunds issued totaling $317.7 billion. Of the refunds, more than 102 million were direct-deposited. The average tax refund by year
Each year, taxes come out a little different. It’s a result of a lot of factors: tax requirements set by the government, unemployment rates, etc. This is what the average tax refunds looked like over the past couple years. Tax year Average tax refund (end of season numbers) 2015 $2,860 2016 $2,763 2017 $2,899 2018 $2,869 2019 $2,476 2020 $2,827 How tax refunds work
As a U.S. resident, you must pay a portion of all your earnings to the federal government to meet your tax obligation. Your employer is responsible for collecting taxes from every paycheck and paying the IRS on your behalf. in depends on your earnings and how you fill out IRS Form W-4, which goes to your employer and includes your filing status and number of dependents. The more dependents you claim, the more money you get to keep each pay period. In addition, taxes for Social Security and Medicare are withheld from your check. These are called FICA (Federal Insurance Contributions Act) taxes. In 2021, the FICA tax rate is the same as the past year at 7.65 percent, 6.2 percent for Social Security (listed as OASDI on your pay stub) and 1.45 percent for Medicare. There is a wage ceiling for Social Security taxes. For 2021, it is $142,800, more than last year’s limit of $137,700. Gross income above that threshold is exempt. When it’s time to file your taxes, you tally all your earnings, deductions and any tax credits you might have to see what your true tax obligation is for the year. If you had too much money withheld from your pay, the IRS owes you a refund. If too little was deducted from your pay, you will owe the IRS the difference. Lower tax refunds can be a good thing
It’s nice to see a tax refund show up in your bank account, especially if it’s a sizable one. But a big refund means you are giving the IRS more money during the year than you have to. And when the IRS sends you a refund, it doesn’t come with interest. On the other hand, if you owe the IRS at tax time, it means you’re not having enough taxes withheld from your pay throughout the year. While it may be nice to have the extra money every pay period, you’ll have to write a check to the IRS after paying employment taxes all year. Ideally, you want your tax bill to come out to $0, or very close to it. If you’re paying the IRS too little or too much throughout the year, adjust your W-4. Use the to figure out how many exemptions to claim. Learn more
SHARE: Libby Wells covers banking and deposit products. She has more than 30 years’ experience as a writer and editor for newspapers, magazines and online publications. Lance Davis is the Vice President of Content for Bankrate. Lance leads a team responsible for creating educational content that guides people through the pivotal steps in their financial journey. Related Articles