[Tax Season] Only 40% of Americans have enough money in their bank accounts to cover anticipated tax bills.

MANAGE MONEY - TAXES
FinanceBuzz surveyed 1,500 people to find out how they plan to file their taxes, whether they expect to owe money or receive a refund, and more.
Updated April 3, 2023
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Tax season has come back around and is now underway. This year, the IRS expects Americans to file more than 168 million individual tax returns, and people will submit many of those much earlier than the April 18th deadline.

To understand how Americans feel entering the 2023 tax season, our team at FinanceBuzz surveyed 1,500 U.S. adults to ask about how they plan to file, how prepared they are for addressing their tax burdens, and what nuances of their tax plan are.

In this article

Key findings

  • Only 40% of Americans who think they will owe taxes this year say they have enough money in their bank accounts to cover their anticipated tax bills.
  • Among people who plan on receiving a refund, 37% think it will be smaller than last year while only 34% think it will be bigger.
  • 82% of Americans feel confident they’re accurately representing their income on their taxes.
  • 69% of Americans feel confident they’re taking advantage of eligible deductions.
  • 20% of people with side-hustle income say they don’t plan to report it on their taxes.
  • Early birds: 58% of Americans plan on filing their taxes before March.

How are Americans tackling their taxes?

According to our survey results, nearly 60% of people plan to file, or have already filed, their taxes within the first two months of 2023.

Bar chart showing how people plan to prepare their taxes this year.


DIY is popular — 43% of people plan to use paid software or a paid app to help input, calculate, and file taxes, while 12% of people plan to use free software.

An extra 8% of people are doing things old-school — they plan to print out and prepare paper tax forms by hand.

On the flip side, around one-in-five people (22%) plan to pay a professional (such as a CPA or bookkeeper) to prepare their taxes. That number is down 13 percentage points from 2019 when a similar FinanceBuzz survey found that 35% of people were going to hire a tax pro to prepare their taxes.

What are filers expecting this year?

Our survey found that more than two-thirds of people (67%) believe they will receive a tax refund this year.

Of people who expect to pay taxes, a shocking 44% of people believe they will not be able to afford their tax bill with the money currently in their bank account

Filers who expect refunds

The number of people who expect tax refunds this year (67%) is probably lower than it should be considering 75% of filers received refunds last year.

Among people who expect to get money back, a minority feel pessimistic about the amount. 37% of people believe their refund will be smaller than it was last year while only 34% think it will be bigger.

More people should prepare for lower refunds. Early indicators show tax refunds are 11% smaller on average than last year’s.

Pie chart showing percentage of Americans who can and cannot afford their anticipated tax bill this season.


Filers who expect to owe money

44% of people believe they won’t be able to afford their tax bill with the money currently in their bank account. An additional 16% are unsure if they will be able to afford their tax bill, which means that only 40% of expected payees actually think they will be able to pay their taxes.

How confident filers feel about accuracy

A bar chart showing how confident people are that their taxes are accurate.


People feel most confident about their income reporting. The majority of respondents, 82%, expressed at least some confidence that they are correctly representing themselves and their earnings on their tax forms, with just 5% of people lacking confidence in that regard.

Finding all eligible deductions gives people the most pause. 14% of people said they lack confidence in that regard, while just 69% are either fairly confident (43%) or very confident (26%).

Reporting side hustle income (or not)

Nearly one-third of people surveyed (31%) said they had a side hustle last year. Extra work and income should be reported if it’s over $400 per year, but that doesn’t mean everyone actually will.

A pie chart and bar chart showing how many people plan to report side hustle income on their taxes this year.


Among people with at least one side hustle, only 75% of them said they plan to report their side hustle income on their taxes this year, while 5% declined to say whether or not they will report it.

The remaining 20% — one out of every five people with a side hustle — plan to lie on their taxes by excluding income earned from side hustles.

How will filers with a refund spend it?

A bar chart showing how people would spend $1,000 if they got a tax refund in that amount.


When asked what they would do if they received a $1,000 refund, nearly half of people (47%) said they would resist the urge to spend it right away and would instead save or invest it.

Additionally, at least one-third of people said they would either catch up on bills (38%) or pay down their existing debt (33%) should they receive a $1,000 refund.

Only 12% of people said they would use a $1,000 refund to treat themselves to something like a vacation or to splurge on a big purchase.

How will filers who owe money pay the government?

A bar chart showing how people plan to pay their taxes if they owe money this year.


We asked people which payment method they’d use to cover a hypothetical tax bill if they owed money this year. Debit cards were the most common answer — over one-third of people (36%) said that’s what they’d use.

There are three other methods that at least 10% of people said they would use:

  1. Bank accounts: 17% said they’d send money directly from one of their banking accounts.
  2. Checks: 15% said they’d write a check.
  3. Credit cards: 14% said they’d use credit cards to pay their taxes.

Tax advice from our experts

Colin M. Slabach

Clinical Assistant Professor – School of Professional Studies

New York University

When is it time to hire a professional to file your taxes vs. simply self-filing?

There are some key reasons why an individual would want to seek out a tax professional:

  1. Complex situation: If your tax situation is complex, such as moving from one state to another, having multiple sources of income, owning rental properties, or lacking the knowledge and confidence of how to file your taxes, you should contact a tax professional.
  2. Accuracy: If you are ... unsure about the tax laws and regulations, an accountant may be able to deploy various tax-saving strategies that reduce your liability by more than they are charging. The penalty for negligence or disregard of the rules and regulations is 20% of the portion of the underpayment. Penalty for underpayment due to fraud is 75% of the underpayment.
  3. Time savings: How much is your time worth? For a business owner or successful professional, time is one of their most valuable non-renewable resources. They may choose to hire a professional because the accountant’s cost is lower than the value they put on their hourly rate. However, I would argue that most people who use a tax professional wouldn’t fall into this category and instead use a combination of time savings and accuracy.
When would you recommend anyone who is self-employed or working in the gig-economy to open an LLC or sole proprietorship for tax purposes?

I recommend establishing an LLC for legal reasons immediately when starting a business. However, a separate business entity may not be necessary for self-employed individuals or gig workers if their annual income is expected to be below the $400 tax filing requirement. LLC entities also provide legal protection that also should be considered.

What are factors outside of salary and tax bracket that can affect whether someone gets a refund or ends up owing money when filing taxes?

Numerous factors outside of salary can impact whether someone receives or owes money when filing taxes. The first is above-the-line deductions such as business expenses, moving expenses, and Health Savings Account contributions. Then there are a litany of below-the-line deductions such as excessive medical bills, mortgage interest, donations to charity, and many more. In essence, the government provides credits and deductions for certain activities. An individual could be doing these activities and not claiming the benefit. That is why tax professionals can save their clients so much money.

Lisa Leslie

Family and Consumer Sciences Extension Agent – IFAS

University of Florida

When is it time to hire a professional to file your taxes vs. simply self-filing?

Most individuals can use tax software to file their taxes. A person may want to seek a professional in complicated situations such as selling inherited property, exercising stock options, or operating a small business.

What are factors outside of salary and tax bracket that can affect whether someone gets a refund or ends up owing money when filing taxes?

Taxable salary is affected by how much is contributed to tax deferred accounts such as traditional retirement accounts, health savings accounts (HSA), and flexible spending accounts. Contributions can reduce the current year's tax liability. HSA distributions used for qualified medical expenses are not taxed, so they are very tax efficient. Tax credits have a big impact.

A tax credit is a dollar-for-dollar reduction. Refundable credits can reduce tax liability to below zero. (Your tax liability could be eliminated, and you could also get money back.) The Earned Income Credit is a refundable credit that offers big benefits to modest income earners with qualifying children. The Child Tax Credit and the American Opportunity [Tax] Credit are partially refundable, and the income limit phaseout is relatively high. Examples of other popular credits include the [Child and] Dependent Care Credit, Saver's Credit, and the Lifetime Learning Credit.

Rick Klee

Former Tax Director – Finance Division

University of Notre Dame

When is it time to hire a professional to file your taxes vs. simply self-filing?

Certainly products like TurboTax and H&R; Block’s tax programs make filing on your own more user friendly. As a rule of thumb, if you’re not itemizing and you only have W-2 income and interest income, and maybe even some retirement income forms and/or a brokerage statement, the tax programs can guide you through your return pretty easily and efficiently.

So when should you consider a paid preparer? Consider if the past year resulted in life changes like getting married or divorced, welcoming a child or taking on a second job. These life events may require use of outside help (as well as a review of your tax withholding may be in order). Other situations conducive to considering a paid preparer include if you are making estimated tax payments due to non-wage income, and/or have income from sources such as unemployment income, self-employment earnings, annuity income, or even digital assets.

Finally, if you are filing taxes in multiple states or have moved, it may make sense to ask for help in that particular year.

What are factors outside of salary and tax bracket that can affect whether someone gets a refund or ends up owing money when filing taxes?

The smart-aleck answer is that it’s comparable to the formula to losing weight — you lose weight when you expend more calories than you take in! In the tax world, you get a bigger refund when you get more money withheld on the front end or if you make too big of an estimated payment on unearned income.

Usually employees receive bigger refunds, because IRS tax withholding tables for employers are set up to try to protect employees from being under-withheld. On the other hand, retirees, the self-employed, and individuals with successful investment portfolios typically have much smaller refunds since they have to proactively work much harder through estimated payment requirements (or pension withholding) and amounts can fluctuate significantly from year to year. Also, in the case of many retirees, the tax on social security and retirement income may be more minimal, and so the potential for refunds is then lower as well!

Ken Milani

Professor of Accountancy and Technical Coordinator for the Tax Assistance Program – Mendoza College of Business

University of Notre Dame

When would you recommend anyone who is self-employed or working in the gig economy to open an LLC or sole proprietorship for tax purposes?

Opening an LLC for most self-employed individuals would, in my opinion, not be a good first step since every state has its own unique LLC provisions.

The sole proprietorship route is automatic for a self-employed individual since he or she must prepare a Schedule C as part of the Form 1040. A helpful recommendation to a self-employed person is that he/she document expenses incurred while conducting their "gig" or business. Another hint is to inform the self-employed individual about the federal self-employment tax which is paid in addition to the regular income tax.

Gregory M. Kling

Associate Professor of the Practice of Accounting – Marshall School of Business and Leventhal School of Accounting

University of Southern California

When is it time to hire a professional to file your taxes vs. simply self-filing?

When the individual has more than a W-2 and standard deduction.

When would you recommend anyone who is self-employed or working in the gig economy open an LLC or sole proprietorship for tax purposes?

LLCs are important when the individual wants some sort of liability protection, in addition to general business liability insurance. Otherwise, having a sole proprietorship is sufficient.

What are factors outside of salary and tax bracket that can affect whether someone gets a refund or ends up owing money when filing taxes?

Lots of items. For example, the tax liability is reduced by tax credits such as the tuition credit, child and dependent care credit, etc. The tax liability is increased by, for example, self-employment tax, alternative minimum tax, etc.

Bottom line

Tax season doesn’t have to be a pain. Taking a few steps ahead of time to secure your success will make filing go smoothly this April.

  • Research filing software. Research the best tax software available to you so you can file with confidence and certainty.
  • Compare tax software. Filing software is definitely not one size fits all. Comparing popular programs like TaxAct vs TurboTax can help you make an informed decision before paying.
  • Make the most of your return. If you’re expecting a return this year, learn how to invest money so you can make your money work for you.

Methodology

FinanceBuzz surveyed 1,500 U.S. adults, asking their best practices and sentiments surrounding filing their taxes.

2020 findings

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Author Details

Josh Koebert Josh Koebert is an experienced content marketer that loves exploring how personal finance overlaps with topics such as sports, food, pop culture, and more. His work has been featured on sites such as CNN, ESPN, Business Insider, and Lifehacker.

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