The 2012 filing season opened on Jan. 30, and with it begins the waiting game for federal refunds.
Callers asking “Where’s my refund?” inundate IRS incoming phone lines, leaving customer service reps to explore different possibilities as to why a taxpayer’s refund was not sent out to them as anticipated.
The IRS has dedicated an online tool on their web site for taxpayers to check their refund status. The ‘Where’s My Refund’ automated tracker provides up-to-date status checks of returns and refund.
New for 2013, the tool will include a tracker that displays progress through 3-stages of processing, giving a more real-time update to taxpayers.
Before filing your tax return, you should know that a number of factors can cause your refund to be delayed or canceled outright.
Owing the IRS
If you have a delinquent tax balance on a previous federal tax return, the IRS will offset your refund to that balance. This holds true even if you already have an agreement with the IRS and are making timely monthly repayments on your balance. Too, you cannot use your refund to “substitute” as a monthly payment.
Owing the state
The IRS partners with almost all states for the application of refunds. If you don’t owe the IRS, but you do owe on your state taxes, your federal refund will be sent to the state and applied against the debt. Conversely, your state refund can also be intercepted and sent to the IRS for any outstanding federal debt.
Child support and student loan debt
Other federal and state programs, like child support and government-backed student loan providers can also take your refund. If the IRS is notified by these agencies that you are aberrant in your obligation to make repayment on a court-mandated child support order or if you have defaulted on your student loan, you will not receive your refund.
IRS refund review
Educate yourself as to what you are claiming on your tax return, and be certain that everything is legit. Various credits, overstated deductions taken on a Schedule A or a Schedule C, a sharp increase in dependents claimed and the Head of Household filing status are all potential areas for additional scrutiny. Remember, no matter who prepares your return, you are ultimately responsible for what goes on each line.
Spouse’s debt
For you joint filers, if your spouse has a debt to the IRS or another federal or state agency as discussed above, 100 percent of your joint refund will be offset against those balances. The IRS does not “split” the refund fifty-fifty.
However, you can prevent your portion of the refund from being applied against your spouse’s debt without having to file separately. Send in your tax return with Form 8379, Injured Spouse Allocation.
Earned Income Tax Credit recertification
The Earned Income Tax Credit (EITC) is available for lower income families or individuals, and can generate a refund when you do not owe any tax. If you have qualifying children, the amount you are eligible for increases. However, there are a number of requirements that must be met before you can lawfully take this credit.
If you want to take EITC for a subsequent year after you have been denied the credit on a previous year, you must file Form 8862 to recertify that you are now eligible for the credit. Failure to do so will delay or cancel that portion of your refund, and if your refund is made up entirely of EITC, you will not receive anything from the IRS.
If you fraudulently claim the credit, you may be banned from claiming EITC for a period of 2 or more years.
24-hour refunds
Although tax prep companies boast about how quickly you can walk out of their offices with a refund, the IRS has never deviated from the standard times it takes to process a return.
A refund from a paper return, sent in the mail, can take up to 8 weeks. An electronically filed return may take up to 3 weeks. Adding the option to have your refund directly deposited shaves about a week off of these timeframes; e-filed returns with direct deposits can even be processed in as little as 10 days.
Anything promised earlier than this is something called a Refund Anticipation Loan. The tax prep company is loaning you a sum of money. They in turn are reimbursed by directing your refund back to them. However, if your refund is held because of any of the above reasons, not only will your actual refund be delayed or negated, you will owe the tax prep company their loan back, oftentimes with an interest rate that is not favorable to you as the consumer.
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