Financial Health: What you need to know about tax refunds

As tax filing season approaches, the Internal Revenue Service cautions taxpayers not to rely on receiving their refund by a certain date, especially when making major purchases or paying bills. Some tax returns may require additional review and those tax refunds may take longer.

 

Many factors affect tax refund timing

Just as each tax return is unique and individual, so is each taxpayer’s refund. Here are a few things taxpayers should keep in mind if they are waiting on their tax refund but hear or see on social media that other taxpayers have already received theirs.

Different factors can affect the timing of a refund. The IRS, along with its partners in the tax industry, continue to strengthen security reviews to help protect against identity theft and refund fraud.

Even though the IRS issues most refunds in less than 21 days, it’s possible a particular taxpayer’s refund may take longer. Some tax returns require additional review and take longer to process than others. It may be necessary when a return has errors, is incomplete or is affected by identity theft or fraud. The IRS will contact taxpayers by mail when more information is needed to process a return.

By law, the IRS cannot issue refunds to people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund, including the portion not associated with the credits. This helps ensure taxpayers receive the refund they’re due by giving the IRS more time to detect and prevent fraud.

Using Where’s My Refund?, taxpayers can check the status of their refund within 24 hours after the IRS has received their electronically filed tax return or four weeks after mailing a paper return. It provides a personalized date the taxpayer can expect a refund after the IRS processes the return. Taxpayers should also take into consideration the time it takes to receive a check by mail, or for financial institutions to post the refund to their account.

 

File electronically and use direct deposit

The vast majority of taxpayers get their refunds faster by filing electronically and using direct deposit. It is simple, safe and secure. This is the same electronic transfer system used to deposit nearly 98% of all Social Security and Veterans Affairs benefits into millions of accounts.

Taxpayers select it as their refund method through their tax software and by typing in their bank account number and routing number. Taxpayers can also let their tax preparer know they want direct deposit. It is even also available to the small number of taxpayers still filing by paper.

Refunds should only be deposited directly into accounts that are in the taxpayer’s name, their spouse’s name or both if it’s a joint account. No more than three electronic refunds can be deposited into a single financial account or pre-paid debit card. Taxpayers who exceed the limit will receive an IRS notice and will be mailed a paper refund check. Whether a taxpayer files electronically or on paper, direct deposit gives them access to their refund faster than a paper check.

–Peggy Beasterfeld, EA

 

Peggy’s Tax & Accounting Service

300 SE 29th, Suite C

Topeka, Kansas 66605

Tel: 785-286-7899

Frontdesk@peggystaxks.com

www.peggystaxks.com

 

READ: Your Financial Health: — What are Enrolled Agents?

 

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