The 2025 tax season is off to a sluggish start, with fewer Americans filing their returns, slower processing times, and shrinking refunds.
According to IRS data from the week ending February 14, 2025, tax return numbers are down across the board, reflecting a dip of 4.9% compared to last year. Meanwhile, the average refund has dropped by a significant 32.4%, leaving taxpayers wondering what’s behind the slowdown, and what it means for their wallets.
Why Are Tax Filings Down?
By mid-February, the IRS had received 33.04 million individual income tax returns, down from 34.74 million during the same period in 2024. Most of these were electronically filed, with 32.4 million e-filed returns compared to 34.07 million last year, a 4.9% decrease. Processing has also slowed, with 32.82 million returns processed so far, reflecting a 5% drop year-over-year.
But why are taxpayers holding back? Several factors may be at play:
- IRS Staffing Cuts: Over 6,000 IRS employees were fired this month, part of a broader workforce reduction following a Trump administration hiring freeze. The cuts have led to concerns about slower processing and delayed refunds.
- Privacy Concerns: Reports that Elon Musk’s Department of Government Efficiency (DOGE) requested access to sensitive taxpayer data have fueled fears about data privacy. Although the Justice Department temporarily blocked DOGE’s access, the controversy has left many taxpayers uneasy.
- Immigration Enforcement Debate: President Trump’s suggestion that armed IRS agents could be reassigned to border patrol duties has further added to the agency’s turbulence, raising questions about its ability to focus on tax processing.
IRS.gov Traffic Plummets
Even IRS.gov, the agency’s online hub, is seeing less traffic. Website visits have plummeted by 46.3%, dropping from 231.44 million visits in 2024 to just 124.29 million this year. The downturn might be linked to fewer press releases and updates on the site, only six press releases have been posted since the tax season began, with communications now requiring Treasury Department approval before publication.
Smaller Refunds Hit Taxpayers Hard
One of the biggest shocks for taxpayers this year is the drop in refund amounts. As of mid-February, the IRS had issued 13.66 million refunds, down from 20.88 million last year, a staggering 34.6% decline. The average refund amount has also taken a hit:
- Average Refund: $2,169 (down from $3,207 last year, a 32.4% decrease)
- Average Direct Deposit Refund: $2,252 (down from $3,265 last year)
The IRS has noted that these numbers will likely increase in the coming weeks as refunds tied to the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) are released. These refunds were delayed due to federal rules requiring the IRS to hold them until mid-February, but eligible taxpayers should begin receiving them by March 3, 2025.
Is It Just a Seasonal Slump?
Despite the current slowdown, the IRS remains optimistic that filing numbers will level out as the April 2025 tax deadline of this season approaches. The agency stated that early-season fluctuations are normal and expects filing activity to pick up in the coming weeks. However, this year’s drop is notable compared to both 2024 and 2023, suggesting that external factors may be influencing taxpayer behavior.
What Does It Mean for Taxpayers?
For those still waiting to file, the delays and smaller refunds could signal a challenging tax season. The combination of staffing cuts, privacy concerns, and slower processing times may mean longer waits for refunds and more difficulty reaching IRS representatives for assistance.
However, taxpayers who qualify for refundable credits like the EITC and ACTC should see refunds hitting their bank accounts soon, helping to offset the overall decline in refund amounts.
Looking Ahead: Will Numbers Bounce Back?
While early-season data suggests a slower start to tax season 2025, the final outcome remains uncertain. With several weeks to go before the April 15 deadline, it’s possible that more taxpayers will file as the deadline approaches. However, the combination of workforce reductions, privacy concerns, and slower refunds may continue to impact filing rates and processing times.
For now, the message is clear: taxpayers should file as early as possible to avoid potential delays, and brace for smaller refunds than they might have expected.
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