A tax mystery: Why are fewer people getting refunds?

If it seems like you, or your clients, aren’t getting a tax refund like you used to, you’re not alone. 

The share of taxpayers who get money back at tax time is slowly and, a little mysteriously, shrinking. At the same time, the number of people having to cut a check to the government has been rising. 

The number of refunds so far this year is down by 3.3%, according to the latest IRS statistics that came out before the April 15 filing deadline. It was down last year too, and the year before that. 

While no one is exactly sure why, some point to changes in the way people work. Others suspect it is the way the government calculates how much tax should be withheld from people’s paychecks. And the reversal of fortune could have consequences for how and whether people comply with tax laws. 

Before the pandemic, about three-quarters of filers typically got refunds. Now about 65% do. The IRS distributed fewer refunds last year — 105 million — than it did in 2010, despite collecting 20 million more returns. 

Some tax vets wonder what a decline in refunds will mean for tax compliance. 

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