With tax season in full swing the main source of frustration for most Americans filing taxes in 2018-19 is around their tax refund. Namely why it’s taking so long to get paid and subsequently why it is lower than expected
There are lots of reasons for this and over the years I have written several articles on this topic. With that in mind here are a list of top reasons I have seen, read about and got official word on.
- Filed manually. This will almost certainly delay your refund. That’s why the IRS says that the most effective and swift filing method is e-file with leading software providers. Filing electronically also minimizes errors and process refunds faster
- Tax Reform and Withholding. There have been many tax law changes since the last tax season to support middle class families and provide pandemic relief. If you didn’t change your W-4 or withholding to account for some of the common ones, your return could look very different and is one the main reasons why your refund could be smaller or larger than expected
- Fraud. It could take much longer to get your refund if the IRS deems your tax return submission needs further reviews or your identity needs to be verified. This would add two to nine weeks to the date range of your refund delivery date.
- IRS Tax Application and Systems – Technology and tax software were supposed to have made tax filing more efficient and refunds (where applicable) faster. But thanks to the slew of changes from recent tax code reforms and IRS employee furloughs as a result of the pandemic and government shutdown. This means your return, especially if is more complex than a standard one, may need some manual processing which means delays!
- PATH Act Delays – The IRS had already announced that it will have to hold/delay refund payments for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) due to additional anti-fraud safeguards/reviews under newly enacted laws (PATH Act). This is expected to clear towards the end of February. See more in this video.
- Manual or Check Payment. If you did not select the electronic deposit option to receive your refund, getting a paper check mailed to you adds about a week. If your return was filed by mail, then your refund can take up to 6 weeks from the date the IRS receives a complete and accurate return.
- The IRS budget has been decreasing in real terms over the last decade as Congress cannot agree on funding (partisan issue over IRS overreach). This has resulted in staffing shortages and caused a significant impact on refund processing, especially for returns that require additional or manual reviews. Or as some conspiracy theorists say, if the IRS didn’t have any delays then one would need to question why does the IRS have so many people?
- Dependents claimed on multiple returns will raise a red flag with the IRS systems and almost certainly delay your processing and refund, if applicable. This is a big issue with all the recent dependent credits and ex-spouses each making claims for the same dependents.
- Verify your accountant or tax preparer – Most people get help filing their taxes, either from computer software or a tax professional. But you need to get someone trustworthy. This mean making sure they are properly registered and have a tax preparer tax identification number (PTIN) from the IRS.
Also look for advanced credentials like a CPA or enrolled agent status who can help with more complicated tax matters and get you answers in a more timely fashion. The extra peace of mind may be worth the extra cost. As always check tax preparer credentials on the IRS website
- Keep a watchful eye for promises. Be wary of any tax preparation service that promises larger refunds than the competition and avoid tax preparers who base their fee on a percentage of the refund. Also, be wary of “refund anticipation loans,” which can take a hefty chunk of your refund in commissions.
- Calling the IRS. While talking to a live agent can be useful if you some complicated tax issues or want to check an item specific to your tax filing situation it won’t do anything to speed your refund since the IRS call center staff are not the ones who process the tax returns and refunds where applicable The best option is still to use check the “Where’s My Refund” page or IRS2Go application.
- Prior year audits may increase chance for more scrutiny that could result in longer processing times and refund payments. Further if you have taxes due from prior years, then your refund will be deducted for any back taxes due.
- Foreign income sources – If you have had a prior year declaration for foreign income or accounts, then this could result in additional scrutiny with your return that result in additional processing time.
- Filed late. If you file late or wait till the tax due date, then likely your return processing and refund will be delayed. Common sense, but something a lot of filers forget.
- Ordering your tax transcript is a technique a lot of folks use to get an update on their tax return processing and refund if they are not getting information (or see no bars) from the IRS WMR tool. But the IRS has categorically stated that being able to order your latest tax transcript does NOT mean that your refund has been processed or that a direct deposit payment is imminent.
- Amended returns require additional, and manual processing, which can see refunds delayed for up to 16 weeks.
- Missing or incomplete documentation or information in your return (most online tax filing software checks for this, but manually filed returns are more at risk)
- Incorrect bank details or account numbers provided in your return (see below for how to address)
- If you are using a pre-paid card for the first time and were using a middleman bank (SBBT, Republic, Bofi, etc), some people have had their refund not deposited because the middleman bank does not test deposits to ensure the account is active and correct.
- You filed an injured spouse claim (Form 8379). If you included this form on your return, it can take 11–14 weeks to process.
- Tax Refund Offset – Another area of confusion for those expecting a refund is that when they get a refund it is actually less than the amount they were expecting or provided by their e-filing tool. The reason for this is that the federal government has “offset” or deducted monies from your tax refund to cover debts you owe other federal agencies.
Under the law, federal payments such as tax refunds can be collected against by approved agencies (e.g the IRS) before being paid to you. You will get a letter from the IRS explaining this offset to your federal refund and why it differs from what was estimated in your filed return. They will give you an opportunity to dispute this collection, but you will have to prove you had no federal obligations. If you have questions regarding the offset of your refund you can call the Treasury Offset Program (TOP) on 800-304-3107.
I’ll keep modifying/adding to this list so please leave a comment below if one or more of the above reasons resonate with you or you have a new and wacky reason for your IRS refund delay. Also consider sharing/subscribing to get the latest updates via Facebook, Twitter or your other social media channels.