Originally created 03/03/05

Refunds improve in early filings

WASHINGTON - Federal tax refunds have jumped an average $200 for early filers.

The Internal Revenue Service reported Wednesday that the average refund grew to $2,436 for tax returns filed through last Friday. That's a 9 percent jump from the average $2,230 check sent to early filers last year.

The IRS also said it's seen an uptick in tax returns filed electronically, with strong growth among individuals using tax software to file from home.

The nation's tax collectors estimate that, for the first time, more than half of individual and family tax returns will arrive electronically.

"It's fast, easy and you get refunds in half the time," IRS Commissioner Mark Everson said.

Tax refunds tend to be higher during the early part of the filing season, as individuals expecting a check act quickly to claim their money.

This year's growing refunds can be partly pegged to tax changes that took effect last year, which increased tax benefits for low-income families, said Kathy Burlison, the director of tax implementation at H&R Block.

The changes include an increase in the amount of child tax credit that can be claimed as a tax refund. The old law let families claim 10 percent of their earned income over $10,500, but they can now claim 15 percent of earned income over $10,750.

Low-income families also benefited from a small increase in the earned income tax credit, a benefit aimed at lifting low-wage workers out of poverty.

"That's certainly meaning bigger refunds," Ms. Burlison said.

A tax refund in the spring means a taxpayer overpaid throughout the previous year.

Financial planners counsel taxpayers who get big refunds to make adjustments that let them get that money sooner.

"In general, it's not a good idea to make an interest-free loan to the government or to anybody else," said Alan Straus, an attorney and certified public accountant in Manhattan.

"Most people would do better off adjusting their withholdings so that they take home more every week and don't wind up with a huge refund at the end of the year," he said.


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