Weeks before Americans can start filing their income taxes, H&R Block’s president and CEO Jeff Jones says there are reasons to look forward to the season ahead.
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Wait, what? Taxation and anticipation sound like oil and water.
But for starters, people can expect that filing a return will likely be relatively easier this year than it has been during some recent tax seasons, Jones said in an interview with MarketWatch. They may also feel better about the refunds waiting for them, he added.
Asked about the love-hate relationship Americans have with their income taxes and their tax refund, Jones said, “What I hope they love is that it’s a normal tax season.”
Then what’s to hate this year?
“Well, that it’s taxes,” he said.
But to stick with the positive, Jones — for now — said he isn’t seeing any tax-law changes or major disruptions that would make taxes this year any more complicated than they have to be.
COVID-19 temporarily shut down the IRS in the midst of its 2020 filing season, and the agency pushed back its 2020 filing and payment deadlines. In 2021, the deadline was again pushed back and Congress passed a $1.9 trillion COVID-relief package with massive tax implications while people were filing their taxes.
Some good news for people counting on a refund: Though every taxpayer has their own changing circumstances every year, Jones noted there are currently no tax laws that would decrease the average refunds on 2023 taxes. “There’s no policy, expiring or new, that would suggest that should happen,” he told MarketWatch.
Last year, the IRS paid an average refund of $3,167. That represented a 2.6% decrease from the $3,252 average seen one year earlier.
The shrink occurred because pandemic-era tax breaks and credits faded away . The refunds also hit accounts as Americans reeled from inflating prices.
Things could go in the other direction this year. The IRS starts accepting and processing returns on Jan. 29. As H&R Block amasses initial returns, “there’s a very, very, very early sign that refunds are up,” Jones said.
Jones was quick to caution against reading too much into that, because early averages can easily change as more tax returns pour in.
H&R Block HRB handled approximately 20 million tax returns last year. The company is known for in-person and online tax preparation. But its financial services include its banking app Spruce as well as products for refund advances with no loan fees and interest.
“Broadly, I would say we are seeing the consumer need cash,” Jones said.
Others aren’t foreseeing dips in refunds either.
On the whole, “tax laws are very similar to what they were last year,” said Tom O’Saben, director of tax content and government relations at the National Association of Tax Professionals.
Refund amounts might be around the same this year or somewhat higher depending on the case, he said, but likely not smaller. “So at the moment, we are not expecting any surprises in either direction,” O’Saben said.
IRS Direct File program
That’s not to say there aren’t possible tax twists as the filing season comes into view.
For starters, the IRS is doing a test run of its own free online tax-filing platform for a handful of taxpayers in 12 states. The agency’s “Direct File” program has been criticized by companies that provide online tax prep, including H&R Block and Intuit INTU, the maker of TurboTax.
“I believe it’s unfortunate that the IRS is being politically pressured into doing something where there really isn’t a problem in the market,” Jones said. H&R Block already offers free filing on simple federal returns, he noted.
But Jones shrugs it off. H&R Block has tax-preparation services in Canada and Australia, where the government takes a more active role setting up a return. “We’ve seen very, very, very little impact to our business as a result of that.”
Potential changes to the child tax credit
Another change this tax season could come from a bipartisan tax deal that would include business-friendly rules and also make the child tax credit more generous for low-income filers.
While the child tax credit wouldn’t return to its enhanced 2021 version under the proposal, observers say the new measure would make a difference for families’ finances.
The deal’s backers hope it can become law before the Jan. 29 start of filing season.
If passed, portions of the proposal would have consequences for 2023 returns. The tweaked child tax cut would effectively slash taxes for half of children in the lowest income band and a quarter of children in the second-lowest band, according to the Tax Policy Center.
House Ways and Means Committee members approved the bill Friday in a 40-3 vote. The full House of Representatives and the Senate would still need to approve the bill before it gets sent for a signature from President Joe Biden.
If and when the bill becomes law, Jones said the company will be ready to quickly fold the new rules into its tax-return calculations.
A more generous child tax credit “would be good news for the consumer,” he noted.
Normalcy is good news, too. Beyond possible last-minute or midseason changes to the child tax credit, “knock on wood, we don’t have any reason to believe that it will be an unusual tax season,” Jones said.
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Source: finance.yahoo.com