According to recent reports from CNN & Thompson Reuters; on average, income tax refunds are up 10% from a year ago, due to tax credits included in the economic stimulus package according to IRS Commissioner Douglas Shulman. In 2010, the average tax refund was $3,036, up $266 from 2009, USA Today reports.
"The Recovery Act is a major factor behind these larger, record tax refunds," Shulman said. "About half of all Americans haven't filed taxes yet, so we urge them to look carefully at these Recovery provisions."
Surprisingly, part of the reason for the increase in tax refunds is due to high unemployment. "Tax withholdings are based on the assumption that you are making the same amount of money the whole year ... if people only work part of the year, they typically have more withheld than they even need to pay their taxes," said Roberton Williams, a senior fellow at the Tax Policy Center, Newsoxy.com reports.The Recovery Act provided a number of tax credits that increased the average tax refund that many Americans were unaware of. For example:
- A tax credit of $400 for workers and $800 for married couples.
- A $2,500 tax credit for qualified college expenses.
- A $8,000 tax credit of for first-time home buyers
- An increase to both the Earned Income Tax Credit and the Child Tax Credit.
- A tax break for unemployment benefits making for first $2,400 in unemployment benefits received tax-free.
Of course there is no sense in getting overly excited about your tax returns. They don't mean that you won the lottery. Receiving a tax refund simply means that you overpaid the government and you are getting your own money back.
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