Thirty percent of Americans are relying on their 2022 IRS tax refund to make ends meet, a Credit Karma survey finds.

The percentages are even higher among Gen Zers (40%) and Millennials (46%), according to the survey of 1,000 adults.

Nearly 75% of Americans are expecting a return this year, and of them, 29% expect it will be bigger than last year’s.

Smaller Refunds

That could be faulty thinking. Federal tax refunds, for most Americans, are their biggest windfall of the year—but they are likely to be 16% smaller this year due to the expiration of bigger child tax credits and charitable deductions during COVID, and no COVID stimulus payouts in 2022, the IRS warns.

In 2022, the average IRS tax refund was $3,276, up 14% from $2,791 in 2021, according to the IRS.

The average IRS tax refund is likely to be $2,700 this year, slightly smaller than two years ago, Mark Steber, chief tax information officer at Jackson Hewitt, tells Newsmax.

The IRS is advising taxpayers to gather all of their tax documentation before filing returns, and is encouraging people to file electronically with direct deposit. The agency is also reminding people to ensure that their employer, bank and other payers have up-to-date mailing and email addresses.

John Lloyd, owner of The Wealth Planner in Fort Worth, Texas, agrees with the advice to file electronically. “There’s a saying in the tax world,” Lloyd tells CNBC. “Any time you mail something to the IRS, you want to assume that it’s going to get lost.”

Indeed, as of Nov. 11, 2022, the IRS had 3.7 million unprocessed 2021 individual tax returns.

The IRS thanks taxpayers who are still waiting on their 2021 tax refunds, and blames the backlog on returns that were filed late and extra due diligence at the IRS to protect against identification fraud.

Smart Use of Money

The Credit Karma survey found that many Americans expecting refunds plan to use the money wisely, with 37% vowing to save it and 31% planning to pay down debt.

This may be due to 40% of survey respondents indicating the biggest financial mistake they made in 2022 was not saving any money, followed by 33% saying they regretted not sticking to a budget, and 21% racking up debt.

Credit Karma advocates people to proactively manage their money and their budgets. Making prudent plans for a tax return is a good place to start, according to the credit score advisor.

“Nearly three-quarters of Americans are expecting a tax refund this year, and, for many, it will be the most significant financial windfall of their year,” says Courtney Alev, consumer financial advocate at Credit Karma. “That’s why it’s important to make a plan for your refund.”

Alev recommends taking “a look at your full financial picture to determine how to allocate your funds in a way that aligns with your financial goals for 2023.”

For those interested in saving filing fees, IRS offers Free File (IRS.gov/freefile or IRS2Go.app), a free electronic federal tax filing service for those whose adjusted gross income is $73,000 or less.

Qualtrics conducted the online survey for Credit Karma on Dec. 6, 2022 among 1,009 adults ages 18 and older.