- 37% of taxpayers depend on their refund to make ends meet, including 50% of millennials
- 45% of Gen Z and 46% of self-employed taxpayers say filing their taxes causes them more stress than paying their taxes
- Roughly a quarter (24%) of taxpayers expect their refund to be withheld due to being delinquent on federal debts (i.e. student loans, taxes, child support)
January 27 marks the official opening of the IRS, but the “scaries” are in full effect as many Americans dread filing, and for some, their looming tax bill. While plenty of Americans wait until the last minute to file, many taxpayers eagerly await their refund out of necessity.
According to a new study conducted by Qualtrics on behalf of Intuit Credit Karma, 30% of American taxpayers say the thought of filing their taxes makes them want to cry, increasing to 40% of Gen Z and self-employed filers. At what lengths would young people go to avoid filing their taxes? Nearly a quarter of Gen Z (23%) say they’d rather give up a paycheck, 18% of millennials would rather drive for 20 hours straight, and taking a vow of celibacy for one year takes greater preference for 16% of Gen Z and 15% of millennials. Further evidenced by the admission that filing their taxes causes them more stress than paying their taxes, which is the case for 45% of Gen Z and 46% of self-employed taxpayers.
Filling fears aside, tax refunds carry a lot of importance in Americans’ financial lives, with 37% dependent on their refund to make ends meet, rising to 50% of millennials. Of those who depend on their refund to make ends meet, nearly half (45%) say it’s because of the rising cost of living and necessities (i.e. housing, groceries). Others point to inflation (41%), living paycheck to paycheck (37%) and depleted savings (21%). For millennials, their refund dependencies stem from debt – 26% say they’ve maxed out their credit cards and 23% say they need their refund to pay down high interest debt. And for some of Gen Z, it comes down to income struggles, whether they’ve lost their job or had their hours cut at work (both 18%).
Whatever their refund dependency may be, one-third (33%) of American taxpayers say they would pay a fee, or plan to pay a fee, to access their tax refund early, climbing to 51% of millennials, 43% of Gen Z and 42% of self-employed Americans.
Buried in debt: Tax refunds become a lifeline for Americans
While 27% of American taxpayers plan to use their refund to splurge on non-essentials (i.e. clothes, travel), nearly half (47%) plan to use their refund to pay down debt, which is the case for 59% of millennials. And, these aren’t measly balances Americans are carrying, in fact, more than one-in-five (22%) Americans expect to have $10k+ in debt heading into tax season, climbing to 28% of Gen X.
Debt takes form in many different ways for American taxpayers, mainly credit card debt which 56% of Americans have (61% of millennials), personal loan debt (32% of Americans; 38% of millennials) and medical debt (22%). Yet, for Gen Z, their biggest debt woes stem from student loans, which 37% have outstanding debt for heading into tax season. In fact, roughly one-third (32%) of Gen Z say they’d be less dependent on their tax refund if they didn’t have student loan debt.
Saving money is top of mind for those expecting a refund
Of those who expect to get a tax refund, 40% plan to put it into savings, and for good reason. For 38% of Americans, their savings strategy comes from wanting to be prepared for unexpected expenses (i.e. car repair, medical bills), while another 38% just don’t have a need to spend it and would rather just build their savings. However, millennials may have less of a choice, with 38% admitting that they’re trying to rebuild their savings since depleting it this past year.
Sans refund, tax bills spell more debt for young Americans
Refund usage strategies are a moot point for the roughly half (49%) of taxpayers who expect to owe the IRS this year. More than a quarter (27%) of taxpayers are worried they won’t be able to afford their tax bill this year, which is the case for 36% of self-employed Americans. For Gen Z, fears around tax bill affordability means more debt as 40% expect to take on debt to pay their tax bill. However, the number one way Americans plan to pay their tax bill is by dipping into their savings account (44%).
Those who expect to owe on their taxes aren’t the only ones missing out on refunds this year. Nearly a quarter of American taxpayers (24%) expect their tax refund to be withheld due to being delinquent on federal debts (i.e., student loans, taxes, child support), rising to 35% of Gen Z and 34% of millennials.
Tax stressors heighten for Gen Z and self-employed Americans
It’s a natural tendency for humans to put off undesirable tasks, especially if they fear what’s around the corner, and filing taxes is no exception. Of Gen Z Americans who put off filing their taxes until the last minute, some reasons include not wanting to know what they owe (26%) and the thinking that waiting to file improves their chances of not being audited (25%). That last fear could have been influenced by the 40% of Gen Z taxpayers who seek out tax filing information and tips from social media. Gen Z taxpayers also appear to have little confidence when it comes to filing correctly, which could be adding to their procrastination. Roughly a quarter (26%) say one of their biggest concerns going into tax season is making a mistake on their tax return, falling victim to tax fraud or tax scams (22%) and not getting their maximum refund due to the mistakes they made on their return (16%).
For self-employed taxpayers, their filing procrastination has more to do with the complexities of their job or source of income. A little over two-fifths (44%) of self-employed taxpayers say they put off filing because their tax situation is complicated and requires more time to gather relevant information, while 18% fear they won’t be able to pay their tax bill on time.
American parents rely on the child tax credit (CTC)
One-third (33%) of qualifying American parents plan to claim the 2024 child tax credit on their tax return this year, as more than half (55%) depend on it to make ends meet for their family. Their dependency has likely grown since the pandemic, with 55% saying their financial situation has worsened since the pandemic-era expanded child tax credit expired, rising to 64% of Gen X.
“Tax season evokes different emotions for different people, oftentimes depending on their financial situation,” said Courtney Alev, consumer financial advocate at Credit Karma. “For many American taxpayers, it’s a highly anticipated time when they receive their biggest windfall of the year, which they rely on to make ends meet. For others, it drums up stress and dread due to having more complicated tax situations, fear they will make mistakes when filing, or wanting to prolong facing a tax bill they may not be able to afford. Whether you’re expecting a refund this year or you think you might owe money, my number one tip is to make a plan and leverage the plethora of online resources and tools that can help you do things like estimate how much you might owe or receive, as well as ways to access your refund early, at no cost.”
Methodology
This survey was conducted online within the United States by Qualtrics on behalf of Intuit Credit Karma on December 20, 2024 to January 4, 2025 among 1,000 adults ages 18 and older who plan to file their taxes this tax season.