Next week, hopeful taxpayers will begin checking bank accounts for tax refunds. Tax season opened Jan. 24, and the IRS says most taxpayers who file a tax return with no issues should expect a refund within 21 days if they file electronically and choose direct deposit.
Return Not Yet Processed
If you’re one of the millions of taxpayers—like me—whose 2020 tax returns have not yet been processed, you can still file a 2021 tax return. However, the IRS requires you to input your Adjusted Gross Income, or AGI, from your most recent tax return when you file electronically. If you’re still waiting for processing, make sure to enter $0 (zero dollars) for last year’s AGI when prompted.
Once your tax return has been filed, you’ll likely need to exercise a little patience. Taxpayers who are expecting to adjust advance child tax credit amounts will need to make sure the amounts they’ve received are entered correctly on the tax return. To help taxpayers keep track, the IRS mailed out Letter 6419 to taxpayers. If you didn’t get one, or if you don’t agree with the amount on the letter, all is not lost. You can still check those amounts by using the Child Tax Credit Update Portal and Online Account on IRS.gov. Check carefully since making a mistake could trigger a review, slowing down processing and delaying refunds.
Taxpayers who claim the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) also will have to wait. By law, the IRS must hold refunds tied to the EITC and ACTC until Feb. 15. The hold allows the IRS extra time to match information from forms W-2 and 1099 with data reported on tax returns; in prior years, refunds could be issued before records were checked, which increased the likelihood of fraud. The hold, together with bank processing times and bank holidays, means that taxpayers should not count on seeing those tax refunds until the end of the month.
And remember that the rule requiring the IRS to wait applies to the entire refund—even the portion not associated with the EITC and ACTC.
Where’s My Refund?
Anxious taxpayers looking for information about the status of their tax refund should use tools available through the IRS. Taxpayers can access the “Where’s My Refund?” tool on IRS.gov for the most up-to-date information. A mobile app is also available through Google Play, the Apple Store, and Amazon.
Your refund status should be available within 24 hours—if you e-filed—or within four weeks if you sent your return by mail, the IRS says. The app will show your refund as it progresses through three stages: return received, refund approved, and refund sent. Updates are made daily, usually overnight—there’s no advantage to checking multiple times throughout the day.
You’ll need to provide your Social Security number, filing status, and the exact whole dollar amount of your tax refund to check the status.
The IRS says the average tax refund in 2021 was more than $2,800. But this year, some taxpayers may receive refunds that are smaller than expected. That’s because tens of millions of families received half their estimated child tax credit in advance in 2021—those payments began in July and were mailed or deposited every month through December. Those early payments represent 50% of what the IRS anticipates that you’ll claim on your 2021 tax return—that’s the return you’re filing now. If you’ve already received some of the available credit, you’ll have to make an adjustment on your tax return to account for it—that could result in a smaller tax refund. Ditto for changes since 2020, including making more money. That’s usually a good thing, but since the amount of the credit phases out—meaning it decreases as your income increases—you might be entitled to less credit in 2021 than the IRS estimated.
And don’t forget that unemployment compensation was taxable in 2021. While there was an exemption available in 2020 for up to $10,200 in benefits, it expired. All of your unemployment benefits received in 2021 will be taxed as income.
If you’re checking on your amended return’s status, you won’t find it using the Where’s My Refund? tool. You’ll need to use the “Where’s my Amended Return?” tool for that information.
Some amended Forms 1040, including those for 2019, 2020, and 2021, can now be filed electronically. All other amended returns must be filed by paper. And, if you’re amending a prior year’s return, and the original return for that year was filed on paper, then the amended return must also be filed by paper.
Amended returns can take up to three weeks after mailed to show up in the IRS’s system. And—you already knew there was a wait, but the IRS has been warning that processing can take up to 16 weeks. That processing time also applies to e-filed amended returns. However, as of Jan. 8, the IRS said it still had 2.3 million unprocessed Forms 1040-X in its inventory. That means, they have clarified, that the current wait can be more than 20 weeks.
You’ll want to check your mailbox, not your bank, for those refunds: According to the IRS, direct deposits are not allowed for amended returns.
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Prior Year Returns
Where’s My Refund? will only display the status of your most recently filed tax return within the past two tax years. If you need refund amount information for other years, you’ll need to check your tax transcript.
Here’s where things get tricky. Several years ago, a rumor suggested that you could get your tax refund information faster if you accessed your tax transcript. That’s not true. While your transcript can be helpful for some things—like checking on refunds from prior years or validating your income—your tax transcript will not help you determine when you’ll get your most current tax refund.
The IRS says that it is correcting significantly more problems on returns than in past years. This includes issues related to the Rebate Recovery Credit, EITC, or ACTC claimed on your return. If the IRS can fix the problem without further information, they will do it and mail you an explanation.
But if the IRS needs more information or needs you to verify your identification, they will send a letter asking you to take certain steps. It’s important to respond timely since the IRS says it could take an additional 90 to 120 days to resolve the matter.
What can you do while you wait? Use the IRS online tools and open your mail. But be smart: The IRS will not reach out to you via email, phone, social media, or text to resolve these issues.
As for what not to do?
- Don’t file a second tax return, other than an appropriate superseding return, since it can cause confusion and slow down processing.
- Don’t call the IRS with questions about the timing of your refund—even if you can get through, they won’t be able to give you any information beyond what you can see online at IRS.gov.
- And finally, give your tax preparer a break—while it’s true that they may have confirmation about when your tax return has been mailed or e-filed, they don’t receive regular processing or refund updates. Calling for information won’t speed up the process, and it will make it more difficult for your tax preparer to do their job.
This is a weekly column from Kelly Phillips Erb, the Taxgirl. Erb offers commentary on the latest in tax news, tax law, and tax policy. Look for Erb’s column every week from Bloomberg Tax and follow her on Twitter at @taxgirl.
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