Tax Refunds Archives | Auto Remarketing

Despite tax refunds up 13%, some consumers might not be in a vehicle-buying place

Perhaps if there is not a parade of potential vehicle buyers arriving at your dealership this tax season, a trio of consumer surveys might shed light on why; even though the average federal income tax refund is 13% higher this year than in 2021.

According to filing data from the Internal Revenue Service through March 11, the IRS has issued refunds to 45,319,000 filers so far this year, doling out a total of $151.928 billion. Those figures are 6.6% and 20.5% higher year-over-year, respectively.

Those metrics also compute to an average refund of $3,417, which according to the IRS is 13.3% higher than a year ago.

For independent and buy-here, pay-here dealers moving a lot of metal this tax season, that refund average could mean a healthy down payment, especially since wholesale prices haven’t soften too much.

But for operators not seeing much of an uptick in retail sales this tax season, here are some potential reasons why.

According to a study from H&R Block, a consumer survey by the tax preparation company showed that while 73% of those who struggle financially intend to save some or all of their tax refund, only 44% do, with many citing unexpected expenses as the top reason they are unable to save their refund.

Meanwhile, as part of the Capital One’s ongoing Marketplace Index survey, analysts at that institution said nearly half (47%) of respondents expect a refund after filing their 2021 taxes, with nearly half of lower earners (43%) and three in 10 middle earners (30%) saying their tax refunds would be very or moderately important to their overall financial health this year.

Furthermore, one in five people overspent their 2021 holiday budgets slightly or went well above, according to a consumer survey by ScoreSense, a credit score monitoring product.

“We were surprised to find about half of consumers used cash for holiday spending but about one-fifth of those we surveyed spent too much and regret it. That’s in line with what we’re seeing as consumers return to the pre-pandemic levels of credit problems and lowering credit scores. This is troubling when you consider that many consumers will not receive their usual tax refunds to pay off holiday debt because they can’t take the full write-offs for child tax credit or for college loan interest,” said Carlos Medina, senior vice president at One Technologies, which offers ScoreSense.

“We believe that these factors, along with inflation, will lead to more credit spending for basic living and that consumers will delay major purchases as long as possible. This is sadly a perfect storm for debt and credit problems, and the data is revealing it is happening now,” Medina went on to say in a news release.

IRS filing & refund update: Return volume up 28%

The latest update from the Internal Revenue Service shows the volume of individual tax filings and refunds is off to a roaring start this season.

As of Feb. 11, the IRS said it has received 26,421,000 individual tax returns since the 2022 filing season began on Jan. 24. That’s up 28% from the same juncture a year earlier.

And the IRS indicated it’s also making fast progress in processing those returns, as the latest update showed the agency has gone through 23,438,000 returns, representing a 59.5% lift year-over-year.

The IRS reported that it has issued $20.888 billion in federal refunds to 8,992,000 individuals through Feb. 11. Officials computed the average refund to be $2,323, which is 22.3% higher than at the same point in 2021.

Also of note, the IRS tabulated that its website has gotten 172,827,000 visits during the span when filing season began through Feb. 11. That’s down 53.1% from a year earlier.

IRS confirms processing of returns begins Monday

Monday marks an important day for franchised, independent and buy-here, pay-here dealerships that anticipate a boost in retail vehicle sales in connection with their customers receiving an income tax refund.

The Internal Revenue Service confirmed that the nation’s tax season will start for individual tax return filers on Monday, when the tax agency will begin accepting and processing 2019 tax year returns.

The IRS pointed out the deadline to file 2019 tax returns and pay any tax owed is April 15. Officials said more than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.

“As we enter the filing season, taxpayers should know that the dedicated workforce of the IRS stands ready to help,” IRS commissioner Chuck Rettig said in a news release.

“We encourage taxpayers to plan ahead and use the tools and information available on IRS.gov. The IRS and the nation’s tax community are committed to making this another smooth filing season,” Rettig continued.

The IRS explained that it set Monday as opening date to ensure the security and readiness of key tax processing systems and to address the potential impact of recent tax legislation on 2019 tax returns.

While taxpayers may prepare returns through the IRS’ Free File program as well as many tax software companies and tax professionals before the start date, the IRS reiterated that processing of those returns will begin after IRS systems open on Monday.

“The IRS encourages everyone to consider filing electronically and choosing direct deposit,” Rettig said. “It’s fast, accurate and the best way to get your refund as quickly as possible.”