Most people who file a tax return walk away with a refund. Although you may feel like you’ve won the lottery, a tax refund isn’t free money from the government. It’s actually your own money you’re getting back from Uncle Sam. During the year federal and state taxes are withheld from your pay. If the amount that was withheld is more than your tax liability, you’ll get a tax refund when you file your tax return. This happens because of over-withholding by employers or overestimating taxes by self-employed individuals. Here are some other things you need to know about tax refunds.
What Is a Tax Refund?
A tax refund is essentially a repayment from the government when you’ve overpaid your taxes throughout the year. Think of it as an interest-free loan you’ve given to Uncle Sam. While it might feel like a windfall, it’s actually your own money being returned to you. To avoid overpaying, make sure your W-4 form is filled out correctly and update it if you experience significant life changes, such as getting married or having a child. Overpaying taxes can lead to a tax refund, which you can use to boost your savings or invest in a retirement account.
Adjusting Your Withholding for a Bigger Tax Refund
Do you prefer to get more money per paycheck or a bigger tax refund? Just know that if you choose the latter, you’re giving Uncle Sam an interest-free loan. We’re not here to judge you though. If you owed the IRS this year or received a smaller refund than anticipated, now is a good time to adjust your withholding. Generally, claiming fewer allowances on your W-4 will increase the amount of taxes withheld from your pay. The result will be a smaller paycheck during the year, but a better refund at tax time. Adjusting your withholding properly can even lead to a large tax refund. We suggest using a tax withholding calculator to decide what’s best for you.
Filing Early Reduces the Risk of Identity Theft
Crooks will do anything to get their hands on your money. Whether it’s making phony calls impersonating the IRS or sending phishing emails. Some even steal your personal information to file a fraudulent tax return and claim your refund. You may not even realize there’s an issue until you try to file your return and it gets rejected. Although the problem can be resolved, it won’t happen overnight. Filing early can prevent your refund from landing in the wrong hands.
Make the Most of Tax Breaks, Including the Earned Income Tax Credit
Claiming every tax credit and deduction you’re eligible for minimizes your tax liability and can help you get a bigger refund. Some valuable tax credits you don’t want to miss are the Earned Income Tax Credit (EITC), Child Tax Credit, and the Saver’s Credit. Additionally, the Premium Tax Credit (PTC) can significantly reduce your monthly health plan premiums and is refundable for any unused portion. ezTaxReturn can help you maximize your tax breaks, so you get the biggest possible refund. Start now!
The Tax Refund Process
The tax refund process starts with filing your tax return. This annual ritual involves reporting your income, expenses, and other pertinent tax information. Once you’ve submitted your tax return, the government reviews it to determine if you’ve overpaid your taxes. If you have, they’ll approve your refund and send it your way. For those who file electronically, refunds are typically issued within 21 days. However, if you file a paper return, you might be waiting 6-8 weeks for your refund to arrive.
Select Direct Deposit to Receive Your Refund Fast
Without a shadow of doubt, the fastest way to get your refund is to e-file and choose direct deposit. With ezTaxReturn you can prepare and e-file your return in as little as 30 minutes. Most refunds are issued within 21 days of IRS acceptance. The Internal Revenue Service (IRS) states that most refunds are issued in less than 21 calendar days, though certain tax credits may cause delays. Filing on paper takes weeks longer for your return to be processed. Another perk of choosing direct deposit is that you can split your refund in up to three accounts. Since being a good saver isn’t everyone’s forte, having a portion of your refund deposited directly into your savings can make life easier. The rest of the money can be allocated towards something more fun.
Tax Refund Timing and Status
Wondering where your tax refund is? The IRS has you covered with their “Where’s My Refund?” tool. This handy resource allows you to track your refund status 24 hours after the IRS receives your electronically filed tax return, or four weeks after you’ve mailed a paper return. You can also call the IRS Refund Hotline at 800-829-1954 or use the IRS2Go app for updates. The IRS aims to issue most refunds within 21 calendar days, so keep an eye on these tools to stay informed.
If you filed an amended return and are expecting a refund, you can track its status using the “Where’s My Amended Return?” tool. Keep in mind, it usually takes 16 weeks to be processed.
Correcting Your Bank Information After Filing
Nothing slows down your direct deposit more than providing the wrong account information. On a check, your routing number consists of 9-digits and is located in the lower left-hand corner. The second set of numbers is your checking account number. This information is also listed on your monthly bank statement. Always double check both numbers before e-filing your tax return. If you missed a digit in the bank account or routing number and the IRS is unable deposit your refund, they may issue a paper check instead. The check will be sent to the address on your return so make sure you provide current information. If your refund is deposited into an account that belongs to someone else, you’ll need to work with your bank to recover the funds. If you catch your mistake early, you can try contacting the IRS to stop the direct deposit. They can be reached at 800-829-1040.
The IRS Has the Authority to Seize Your Tax Refund for Certain Debts
We know you’re excited about getting a refund but don’t spend the money before it’s in your account. There are some instances where your refund may be reduced. For example, if you make a mistake on your tax return and the IRS corrects it. The IRS can also seize your refund if you have past-due child support, an unpaid tax debt, unemployment compensation debt or you defaulted on your federal student loans. In either case, you’ll receive an IRS notice in the mail with a detailed explanation.
Avoiding Tax Scams
Tax scams are unfortunately common, with scammers often impersonating the IRS to steal your personal information. These fraudsters might contact you via email, text messages, or social media, asking for sensitive details. Remember, the IRS will never initiate contact through these channels to request personal or financial information. Always be cautious and report any suspicious activity to the IRS to protect yourself from these scams.
The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
