About IRS Refunds
Anyone living and working in the U.S. is required by law to pay taxes and file a federal income tax return each year. While many taxpayers actually look forward to the tax season because of anticipated tax refunds, if you are due a tax refund, too much money has been withheld from your paychecks throughout the year. A tax refund is simply the federal government returning your overpayment of taxes to you.
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Warning
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Believe it or not, some people who are expecting a tax refund forget to file their tax returns. They may even have completed and signed the return, but then forgot to mail it. Other tax refunds get delayed in processing because people mail their tax returns to the wrong address.
Features
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Basic information required before the IRS can process your tax return and issue a refund includes your social security number and filing status. A taxpayer must correctly complete a return, sign it, and file it by the deadline. Once the Internal Revenue Service receives your return, and you are entitled to a refund, a refund check will be mailed to you within 6 to 8 weeks. If you e-file your tax return, you can check the status of your income tax refund online. Electronically filing your return speeds your refund to about half the time than if you mailed in your return.
Prevention/Solution
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Each year the U.S. Postal Service is unable to deliver millions of dollars in tax refund checks to taxpayers because of incorrect addresses. To avoid delays or other problems in receiving your tax refund, make sure that the IRS has your current mailing address, as undeliverable checks are returned to the Internal Revenue Service. If you haven't received a tax refund that you were expecting, notify the IRS of any change in your address. Once the IRS receives a correct mailing address, your check will be reissued. Taxpayers now have the option of updating their address online.
Misconceptions
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There are a lot of things about which some taxpayers get confused when it comes to filing their federal income tax returns each year. Whatever you do, file on time, even if you can't pay the full amount of any tax due when you file your return. You can request an extension or contact the IRS to work out a payment plan. Failure to file your tax return on time will result in additional penalties and interest owed. Even if you don't owe the IRS any money or qualify for a tax refund, you should file a tax return. There are people who mistakenly believe that if taxes have been withheld from their earnings, they need not file a tax return. They fail to realize that they may be entitled to get some of that money back in the form of a refund. They may also qualify for other allowable deductions and tax credits.
Considerations
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Although a taxpayer who does not owe any additional tax to the IRS may not have monetary penalties or criminal sanctions imposed for failure to file an income tax return, you could lose any refund that you might have coming. You must file a tax return in order to receive the refund. In most cases, a taxpayer has up to three years to claim a tax refund. After that time, the IRS may no longer issue the tax refund. Keep in mind that even if you don't owe any tax, you may be entitled to the Earned Income Tax Credit, but you must file a return in order to receive the credit.
Types
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Taxpayers have the option to receive their refunds in various ways. The IRS can mail you a refund check; you can have your refund deposited directly into your bank account or onto a debit card; or you may apply for a Refund Anticipation Loan, in which case, if you qualify, you will receive a loan check within days of filing your return. Bank fees and the tax preparer's fees will be deducted from the anticipated refund amount.
Expert Insight
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Tax advisors recommend using tax refunds to pay down on credit card debt. This could save you from paying hundreds of dollars in interest for the year. Or deposit the money in a savings account where you can withdraw it quickly if you need it should an emergency arise. Keep in mind, too, that a tax refund has a negative side. You should have just enough money withheld from your paycheck to cover your tax liability. If the IRS owes you a refund, the U.S. Treasury has been holding your money interest-free. You could put that money in an interest-bearing account instead.
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