The 2019 tax period has officially begun. Yes, it is quite hectic to do your taxes. But the silver lining is that you can get a refund if you have a credit from your returns.
While you may be rushing to file your returns and beat the deadline, we are sure there is another question at the back of your head: how long does it take to get a tax refund?
We are here to help you understand more on tax refunds- what it is, how you can get one from the IRS, and how long it will take.
A tax refund or rebate is a payment by the taxing authority to the taxpayer when a taxpayer has paid more taxes than they owe. When you file your tax returns, you will either have a tax liability or a tax credit.
If it is a tax liability, you will pay the money owed to the taxing authority. A tax credit works the other way, and the tax authority will pay you for the extra money paid to them.
There are a few legal ways on how you can increase your tax refund. Tax deductions, for example, will help reduce your tax liability.
These include medical expenses, prepaid taxes to the federal or local government interest on mortgages and student loans, charitable donations, and expenses for a dependant and child care.
You can also consider changing your filing status. It might sound like a joke, but your filing status might get in the way of getting a higher tax refund. For example, if you are single and have a qualifying dependent like an elderly relative or a child, you can boost your tax refund by filing as the head of the household.
This status will get you a higher standard deduction and a higher tax bracket. If you are married and file jointly with your spouse, it would be ideal to file separately when one of you has higher medical expenses like COBRA expenses to deduct.
Also, couples earning less than $200,000 and file their taxes separately can take advantage of the Child Tax Credit up to a tune of $2,000 per child below 17 years.
Increasing your HAS and IRA contributions might also get you a higher tax refund. A traditional IRA contribution reduces your total taxable income, which can reduce the amount of tax liability.
Your Roth IRA contributions do not qualify for deductions, but they do qualify for a tax credit. This will ultimately help reduce your tax liability, and maybe earn you a tax refund.
Ultimately, boosting your tax refund requires proper tax planning strategies. Keep receipts for all your financial transactions in an orderly manner, either in excel or a tax planning software.
When it is time to file your returns, talk to your tax advisor, or use a tax plan calculator to get an estimate of your tax refund.
You have filed your returns, and you realize that you have a tax refund. Getting your refund will depend on a few factors:
There are 2 ways to file your returns; by mail or electronically. If you file your returns electronically, you have a higher chance of getting your refund sooner than when you send them by mail.
According to the IRS, anyone whole files electronically can expect their refund within 21 days. If you submit your returns to the IRS by email, you can give then 2-3 weeks before they are processed and up to 6 to 8 weeks for the refund to be processed.
Also, e-returns means that you will receive your refund as a direct deposit compared to paper returns that get you a cheque from the IRS.
The sooner you file your returns, the sooner you get that refund. The deadline for filing your returns is April 15, 2020, and the IRS opened its systems on 27 January 2020.
If you file your returns in January or February, it means you can have your refund before the end of February or March 2020.
If you are claiming Child Tax Credits (CTC) and Earned Income Tax Credit (EITC), there might be a delay in getting your tax refund by 2-3 weeks. Also, these credits will be processed after 15 February 2020.
To curb the rising cases of abuse of these credits, IRS was given additional time to verify these claims before processing the refund.
An existing tax liability with the IRS will hinder any possibility of getting a refund. In case you have an existing obligation, the IRS will take your tax credit to repay this liability and send you any excess money.
For example, if you have a current tax liability of $400 and you claim a refund of $1000, the IRS will offset this liability with the credit. This means that you will receive a refund of $600. If the balance is zero after the offset, then you will not receive any refund.
Yes, it is possible to track the progress of your refund using Where's my refund? feature on the IRS website. After filing your returns electronically, you can start checking the progress after 24 - 48 hours.
For returns files manually, you can check the progress after 4 weeks. You will also need your ITIN or social security number, the exact refund amount, and your filing status.
If the IRS has started to process your tax returns, you will see "Return Received" on the tool. At this point, you will not see the date of the tax refund. When the IRS finalizes your returns and the refund is approved, the status will change to "Refund Approved."
Once your refund is approved, the IRS will provide a personalized refund date. Once the refund sent, the status will change to "Refund Sent," meaning your refund is processed and sent to your bank account via direct deposit.
However, if you elected to receive a cheque via mail, it might take a few weeks before the check arrives.
Have you filed your tax returns yet? Are you expecting a tax refund? If yes, here a few ways to invest that money.