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On the radar: IRS filing season started off slow, but size of refunds picked up and may have peaked

The IRS filing season statistics for tax year 2019 have been reported for the weeks ending January 31, February 7, February 14, and February 21. The pace of tax filings is a bit slower at the start of 2020 but it will looks set to catch up quickly. Like comparable period last year, the size of refunds was modest for the first three weeks and then took a jump higher in the fourth.

The average size of a tax refunds reached $3,125 in the week ended February 21, 2020 compared to the $3,143 in the week ended February 22, 2019. Direct deposit refunds were even larger at $3,200 in the 2020 week and $3,226 in the prior year.

In recent years, the fourth week of the tax filing season is usually when the size of refunds peaks and then starts to decline. Those who expect a tax refund typically file sooner and electronically, and take their refund via direct deposit as the fastest path to receiving the money. I note there has been some change in pattern in the last four years that is probably related to the prevalence of using tax preparation software that has increased electronic filing and the use of direct deposit of refunds. Even those who are anticipating a smaller refund are deriving the benefits of earlier filing. In 2020, given the timing of the calendar and the relatively slower pace of filings, I would not be surprised to see the size of a refund climb a little when the February 28 data is released. However, it is probably mostly downhill for the size of refunds as the April 15 deadline approaches.

See the January 8 “On the radar: 2020 tax filing season runs January 27-April 15“.

In the aftermath of the financial crisis, a tax refund money went into reducing debt or rebuilding savings. Ten years out and with a strong labor market and rising incomes, consumers are more likely to spend the refunds. February retail numbers probably won’t get much of a boost when these are reported at 8:30 ET on Tuesday, March 17. However, I would look a nice bounce upward in the March data.

A selected history of IRS Filing Season Statistics is available in the Whetstone Analysis Reference Library

 

 

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