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IRS says average tax refund is down 9 percent this year

WASHINGTON - The average tax refund is down 9 percent this year, the Internal Revenue Service announced Thursday.

Tax filing season opened two weeks ago, so the data only reflects early filers. But it indicates that refunds are down - even though the majority of Americans, 80 percent, will end up paying less on their 2018 taxes as a result of the Republican tax law.

The IRS said the average refund is $1,949 for returns processed so far, down from $2,135 for the same period a year ago. Americans have until April 15 to file their taxes without penalty.

Senior Treasury officials said Thursday that fewer Americans will get tax refunds this year and that the average refund will be lower. The number of Americans receiving refunds so far is down by about 1 million compared with last year.

The Trump administration argues that Americans are better off from the changes to the tax code and withholding because they end up paying less. Financial experts say tax refunds actually hurt filers, because they amount to giving the government a loan.

"Most financial advisers advise their clients to keep their tax refund as low as possible," said a senior Treasury official on a call with reporters.

Despite a lower bill overall as a result of the tax revisions enacted in December 2017, many early filers are still upset about getting a smaller refund or unexpectedly owing money.

Refunds are shrinking for many Americans because they paid closer to the right amount of tax in their 2018 paychecks than they did in prior years. A refund is what happens when the government returns money that people overpaid.

About 75 percent of Americans received refunds in recent years. The average refund was almost $2,900 last year, a large infusion of cash that many people used to pay down student loans, credit card debt and other big bills.

The IRS estimated that several million tax filers would go from getting a refund last year to not getting one this year or even owing money.

About 5 percent of Americans are paying more in taxes after the GOP tax law, so their refunds are also declining or disappearing entirely.

Many people with higher tax bills live in expensive urban areas where they pay high property and state and local taxes. The GOP tax bill capped the deduction for state and local taxes. That law also eliminated some popular tax deductions for business expenses, including mileage.

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