Tax refund delays can be caused by many things, such as computational errors, incomplete tax returns, and incorrect deposit information. Other instances include social security number mismatches, early or late tax filing returns, and tax return amendments.
Thankfully, since the introduction of IRS electronic tax filing, or e-filing, the tax process has significantly improved. Returns can now be processed in three weeks or less, in contrast to previously longer periods of time. As a result, many, if not most, taxpayers themselves are largely responsible for tax refund delays.
While some of the reasons for delays may be independent from the taxpayer, they can still be minimized in certain ways:
1. Maintenance of prior tax periods
Many tax refund delays are caused by inaccuracies and incomplete information in returns filed by taxpayers. Having and using information from previous years’ tax returns can be especially helpful. Ideally, records from the last three tax years should be maintained to keep refund delays at bay.
2. Adequate preparation
Lack of adequate preparation may result in delays in obtaining your tax refund. To avoid this, taxpayers should strive to create a file of necessary tax forms such as W-2s, 1099 forms, etc. Most of these are typically sent by the related institutions to taxpayers throughout the month of January.
Those who may not have received these forms can attempt contacting their employers or related institutions to obtain copies of the required documentation.
With the advent of e-filing, taxpayers have been able to minimize the amount and extent of computing errors on tax returns. More than 90 percent of all returns are now filed electronically.
It is easier for the e-filing software to spot and check for errors, as opposed to paper returns that increase the likelihood of mistakes. Tax professionals are required to e-file returns.
4. Direct Deposit
Taxpayers now have the option of having their refund checks deposited directly into their bank accounts. This reduces the chances of their refund checks getting lost, stolen, or undeliverable. However, it’s crucial that taxpayers double-check their bank’s routing number and account number to reduce chances of their refund being deposited in the wrong account.
In addition, the IRS requires taxpayers to indicate whether they had individual health insurance throughout the year to electronically file their return. They are also required to indicate if they qualify for an exemption or have received the premium tax credit. Although many returns demand additional time, most refunds are issued by the IRS in less than 21 days. In case when returns take longer than that, taxpayers have the option of calling the IRS or using IRS tools such as “Where’s My Refund” or the IRS2Go app to inquire about their refund status.
The Balance Sheet is a bookkeeping and accounting services firm located in West Palm Beach, Florida. It was created by Maxine Taylor out of a need to help her clients make better projections and financial decisions for their businesses.