Turning Red to Black Blog

Turning Red to Black Blog

Turning Red to Black Blog: Discussing Topics Related to Revenue Cycle Management, Debt Collection, Debt Recovery, Debt Management, Billing Operations and Billing Procedures

First Come, First Serve: Americans Facing Smaller Tax Refunds in 2019

The tax overhaul that took place last year has some consumers up in arms over their tax returns in 2019.  Some of this can be traced to the loss of certain deductions but the main culprit seems to be that the IRS is making an effort to more closely match the amount withheld from paychecks with what is actually owed.  So, while these same consumers had fatter paychecks over the last year, their tax returns are proving to be significantly lighter.  In general, this is a good thing as the consumer isn’t allowing Uncle Sam to, in essence, use their money interest free for a year, but it is going to have an effect on tax season for the accounts receivable management (ARM) industry.

stopwatch on a $100 bill

As we have noted over the years, at least one-third of refund recipients will use at least a portion of their return to pay down their debt.  But this year more than any other year, it’s going to be first come, first serve.  In other words, those at the front of the line are going to have the best chance of taking advantage of tax season by getting paid on their open A/R and bad debt.  Consumers will be ready to pay down some debt, they just might not be able to pay down as much as they normally would.

This means it is critically important to have had your placements coming in over the last few months but it’s not too late (yet!) to get them in now to take advantage of the second half of the season.  With the partial federal shutdown in January, some people may have figured they might as well wait to submit their returns but the IRS announced that they would start processing returns only a week or so later than usual on January 28th and within the first week of February the first recipients were receiving their refunds via direct deposit.  Still with an April 15th deadline, there will be plenty of stragglers this year.

But make no mistake, it’s now or never to get your placements cranking for the 2019 tax season.  Keep in mind, Simon’s makes its own adjustments this time of year in order to put its clients in the best possible position to collect from the consumers that owe them.  Don’t be afraid to prioritize your own A/R and collections this time of year as well.  There are steps that your organization can take to maximize its revenue during tax season as well.

Perhaps consumers will make the necessary adjustments to their paycheck withholdings and return to the cycle of higher tax returns in 2020.  While it is always recommended to get the most money you can out of your paycheck, many people prefer to have a windfall in the late winter or early spring and many of these same consumers will once again choose to pay down their debt with it.

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