Bush administration predicts bigger tax refunds

WASHINGTON -- The Bush administration predicted Thursday that a record number of taxpayers can expect a refund this year, and that the average tax refund check will be $300 bigger than last year.

The Treasury Department credited the most recent round of tax cuts, passed in May, with fattening this year's refunds.

As a result of the summer's tax cuts, the Treasury Department expects the government to mail $195 billion in tax refunds this spring, a $37 billion increase over last year.

The predictions also were an election-year reminder to voters of the tax cuts passed during President Bush's time in office.

The refunds come at a price, however, in the form of more complicated tax forms. The Internal Revenue Service has already detected errors on more than 750,000 tax returns claiming the newly increased child tax credit.

Last summer's tax cut made the child tax credit worth up to $1,000 per child. It also reduced income tax rates ahead of schedule and lowered taxes for some married couples. Other changes lowered the top tax rate on stock dividends and capital gains to 15 percent.

Nearly all the changes became effective Jan. 1, 2003, even though the tax changes didn't become law until almost six months later.

Consequently, changes didn't show up in workers' paychecks until late in the year, leaving taxes overpaid during the beginning of the year to arrive this spring as a larger refund.

"These are the tax cuts that have already been advertised -- heavily advertised," said Peter Orszag, a senior fellow at the Brookings Institution, a nonpartisan research group. "Some of the cash flow from those tax cuts were delayed."

Many parents had already gotten a taste of this year's refunds during the summer. The government delivered up to $400 per child to parents who had qualified for the credit the year before. Those parents, now filling out their tax returns, can claim the rest of the $1,000 credit or up to $600 per child.

Some of those parents appear to be having a hard time filling out their tax returns, taking those early payments into account.

The IRS said returns already filed this year show 490,000 taxpayers did not take into account the check received last summer when filing their returns. Another 283,000 made other computational errors, including mistakes calculating how much of the credit can be refunded to low-income taxpayers with little or no income tax liability.

Taxpayers who got a child tax credit check this summer also received a letter with the amount of the payment. Those who can't find that letter can use the IRS web site to find how much they've already been paid.

If the IRS detects a mistake on a tax return, it makes a correction and sends a notice to taxpayers. That happens whether the taxpayer claimed a credit that was too small, resulting in a lower tax bill or bigger refund, or the taxpayer took a credit that was too large, which could reduce a refund or turn an expected refund into a bill.

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On the Web:

Internal Revenue Service: www.irs.gov