There are a number of reasons for delayed tax refunds, but first…
What is a Tax Refund or Rebate?
A tax refund is payment made to the taxpayer for paying more than what is required or owed.
In simpler terms, A tax refund is money paid to an eligible taxpayer when such taxpayer pays more than they are supposed to.
As a taxpayer, What qualifies you for a Tax Refund?
- Committing an error while filling the Form W-4 will make you eligible for a tax refund or rebate.
- If you as a taxpayer intentionally fills out the W-4 to have a higher withholding and tax refund.
- You as a taxpayer forgot to update their Form W-4 to indicate or reflect a change in circumstance like the birth of a child or an additional child (child tax credit(CTC).
- You as a freelancer or a self – employed person who files quarterly estimated taxes may decide to overpay to avoid underpayment penalties or surprise tax bills.
- If the taxpayer is eligible for refundable tax credits , this reduces the amount of taxes owed below 0$,even if no tax was owed otherwise. If the credit is larger than your tax bill, you will recieve a refund for the difference.
To avoid overpaying on your tax bill you must fill out your W-4 form correctly and update the form accordingly if your life experiences a significant change or circumstance such as a new job,birth of a child, a drop or spike in income.
How do tax refunds get paid and how does it work?
Tax refunds will be issued as paper checks through the mail or as direct mail deposits to the taxpayer’s bank account. Taxpayers could equally use their refunds to purchase U.S series saving bonds. The quickest way for you to get your tax refund is to e-file your tax return and choose direct deposit.
Tax refunds are issued within a few weeks of filing a tax return, But there are instances where the refunds might take longer depending on the number of reasons.
Common reasons for tax refunds delay.
Waiting for tax refunds to show up
After filing for a tax refund, The worst possible thing you can do to yourself and the tax return turnaround time is to wait for your returns to show up. Although the invention of the e-filing system has effectively sped up the turnaround time for tax refund processing and payment, most returns are made within 1-3weeks. With the introduction of this processing system the late payment of tax refunds are hardly the fault of an external body as this responsibility falls solely on the taxpayer as nonchalance, errors and oversight could set back the processing of tax refunds.
Missing or Omitted Information
Another popular cause of slow payment of tax refund is missing or omitted information. Failing to add key information like dependent’s social security could lead to significant hold up. Additional issues like absence of copies of the W-2 or 1009 forms, absence of important forms and/or computation errors could lead to a drastic delay in processing time.
Common calculation mistakes like the taxable amount of Social Security income, taxable income and the child and Dependent Care Credit could also slow down tax refund processing time to a crawl. Other errors like amount of taxes withheld, estimated taxes paid, The Earned Income Tax Credit or the increase standard deduction for some taxpayers result could lead to computational errors.
Social Security Number(SSN) fails to match
In the process of verifying tax return information, the IRS makes sure the Social Security Number (SSN) and the taxpayer’s name on the filed return matches with the information in its database. Any conflict could set back processing time horribly.
Fortunately for taxpayers , the electronic filing procedure checks for such conflicts . Electronically filed returns with this kind of conflict are rejected, letting you to rectify them before you submit your return again.
Tax return is filed too early or too late
As humans we are prone to emotions and anxiety is one of such emotions. In an anxious bid to get one’s tax refunds quickly you might be tempted to file early, but doing this might work against you. Here’s why..
Due to several loopholes in the system, tax codes and procedures are liable to last minute changes. This could lead to delays as the IRS might need to make updates to their tax softwares to incorporate these new laws, regulations and procedures. These delays might not be to a large extent but can be evaded by holding until week 3 or 4 of that year. For example there was an instance where the IRS had to delay filed returns for a week as the IRS was adding mechanisms that’ll help combat fraud to their systems.
Filing late could also result in delayed task returns as late filing could mean you could be vulnerable to identity thieves and tax return scams.
Trying to file for a refund with an already logged Social Security Number could lead to the system flagging such an SSN. If a scammer processes for a refund before the legitimate owner the Social Security does it, Such a scammer is sure to have easy payday.If you smell any foul play with your tax refund be sure to contact the IRS immediately.
Wrong or incomplete direct deposit details
The quickest and easiest way to receive a rebate is to electronically file the appropriate return and ask that a direct deposit of the payment be made to your bank account. It is important to double check your data entry as any misinformation could lead to delay in tax refund or even worse— your refund falling into the wrong hands. In the event of any issues , the IRS would issue a paper check and mail the check to the eligible taxpayer.
Alternatively, you can request for a check which would be mailed directly to physical mail address. This process is relatively slower than the direct deposit but it ensures you’ll definitely your refund unless there’s a problem with the physical mail address which is highly unlikely.
Taxpayer chooses to file physical tax returns
Despite producing accurate information and avoiding possible errors, physical tax returns would lead to longer waiting time before refund is received. While electronically filed returns take three weeks or less to be received, refunds physical filed take five weeks or more to be fully processed and paid.
The reason for this delay is because physically mailed returns have to be entered into the computer manually by hand.
Although, e-filing is the fastest option for most taxpayers, some situations require you to file a paper return.
You filed for a tax return amendment
In the event of a necessary correction to an already filed tax return, you’ll need to compose an amended tax return. Before the year 2019, amended tax returns could only be filed by mailing in a paper form. Beginning from 2020, The IRS made it easier by letting taxpayers file amended tax returns electronically. This is only possible if the original tax refund was electronically filed.
To file an amended tax return, use Form 1040X, Amended U.S. Individual Income Tax Return to file an amended tax return.
More importantly, Taxpayers should note that amended tax returns made before the year 2019 cannot be e-filed and can only be physically mailed. Processing typically takes 7weeks or more.
Taxpayer has fallen victim to tax scams.
This is one of the most common reasons for delayed tax refunds. Due to the various loopholes in the system, It is possible to file for and claim a tax refund with stolen identity. This type of tax fraud is often oblivious to the taxpayer and the IRS is mostly unable to detect if the filing was legit or not.
If as a taxpayer, you notice you’ve fallen victim to tax- related identity theft, contact the IRS and Federal Trade Commission to report it immediately.
Refund was sent to the wrong bank account.
As established earlier, Filing electronically is one of the safest, fastest and easiest way to get your refund especially if you’re using a direct deposit. But this assumes that you entered your information correctly. If you entered the wrong routing number or account number, your refund could get sent to someone else’s bank account.
