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Large IRS refunds rise after law’s changes, but withholding timing muddles signals
The article points to a $43 billion jump in IRS refunds in the 2026 filing season, while noting the IRS did not update withholding tables after the 2025 tax law, which helped drive refunds higher.
Yahoo Finance highlights ongoing debate about whether Americans feeling bearish about the economy are reading the data correctly, pointing to the May Economic Confidence Index falling to its lowest level since 2022 and then rebounding slightly in August to -39 from -45 in May.
It also cites a Sept. 3 Fox News op-ed by Julio Gonzalez, founder of Engineered Tax Services, arguing that the One Big Beautiful Bill Act, signed by President Trump in 2025, contributed to strong growth. Gonzalez links the bill to increased business investment and a reported $43 billion increase in IRS tax refunds in the 2026 tax filing season, and he emphasizes provisions including the permanent restoration of the 100% first-year depreciation deduction and a higher Section 179 deduction limit.
The article adds context, saying large refunds do not always indicate a stronger economy. It notes Gonzalez did not mention that refunds were unusually large in part because the IRS did not adjust withholding tables after the law’s passage, despite applying the changes retroactively, leaving some employers to withhold taxes without accounting for updated deductions and rates, which the article says resulted in too much withheld from workers’ paychecks.
Finally, Yahoo Finance says the same developments can reflect only part of the picture, mentioning that corporate expansion and other economic indicators cited in the piece include employers planning hiring increases in the second half of the year and August U.S. business activity surging to the highest level in 52 months.