A tax refund can come in handy when you need to pay down student debt or you want to pad your emergency savings. But waiting for the money to hit your bank account can be nerve-wracking. According to the IRS, most refunds are processed within 21 days. For some unlucky taxpayers, the wait can be much longer. If you find yourself relying on your refund year after year, you might need to work with a financial advisor to put a proper financial plan together. Here are four reasons why its arrival could be delayed.
Check out our federal income tax return calculator.
1. You Made an Error on Your Tax Return
When tax returns are received, they’re subjected to a cursory review to make sure the information you provided matches up with what the IRS already has on file. If you entered something incorrectly, that may trigger a more detailed review of your return. In that scenario, an IRS worker would have to go over your return line-by-line, which can cause a delay of several days due to the extra processing time.
The takeaway? Before you submit your return electronically or drop it in the mail, it’s a good idea to double-check (or triple-check) all of your information to make sure it’s correct.
2. You Have an Outstanding Debt
The IRS has the authority to garnish your tax refund in situations where you owe certain types of debt, starting with back taxes. If you owe money to the federal government or your state income tax agency, your refund can be applied to the balance due without your consent. The same holds if you default on a federal student loan or you owe back child support.
If your refund is garnished to pay a debt, the IRS will send out a notice letting you know why. If you don’t think you owe the debt, you’ll have to dispute it with the agency the money was paid to, not the IRS. In situations where a joint refund is seized for a debt that only your spouse owes, you can file an Injured Spouse claim to get your share of the money back.
3. You Entered the Wrong Bank Account Information
Direct deposit is the fastest way to get your tax refund and the very last thing you can afford to do is punch in the wrong routing or account number. If the account is closed down, the deposit gets returned to the IRS, at which point you’ll be issued a paper check. Paper checks can take weeks to arrive.
When a tax refund gets deposited in someone else’s bank account by mistake, however, it can be extremely difficult to untangle. You’ll have to fill out Form 3911 to trace where the money went. This form authorizes the IRS to request a reversal of the deposit from the bank that received the refund.
If the bank complies, you’ll be back to waiting on a paper check. Just keep in mind that banks aren’t required to reverse refund deposits made in error so you may have to do some wrangling to get the money back.
4. You’ve Been Targeted by an Identity Thief
Identity theft is one of the biggest issues the IRS faces and refund theft is something you need to be on the lookout for. This happens when an identity thief files a fraudulent return using your personal information to get their hands on a refund. If you file another return using the same information, it’s going to be flagged by the IRS and you won’t be able to get your refund until the issue is cleared up.
The Bottom Line
Having to wait on your tax refund can be a hassle. But understanding what could be holding it up can make the wait a little less painful. Using the IRS Where’s My Refund? tool or the IRS2Go app are the best ways to keep tabs on where your money is.
Tax Planning Tips
- A financial advisor can help you optimize a tax strategy for your financial goals. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors who can help you achieve your financial goals, get started now.
- Tax refunds are a great financial boost. Whether you plan on saving for retirement, paying off college or credit card debt, or investing your money differently, SmartAsset’s tax return calculator can help you figure out how much you will get back from the government so you can plan ahead.
- A financial advisor who specializes in tax planning can help lower your taxes by harvesting tax losses. This means that you will be able to use your investment losses to reduce taxes on capital gains or income.
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