Tax refunds get delayed for several reasons, and we are to blame for many of them. Experts have their opinions on how to avoid these pitfalls and hasten up the process so that you get your tax refund within months. And they all agree on a variety of ways in which you can make it happen faster.
It is the time of the year when millions of Americans, especially in the low and moderate-income categories, eagerly expect their tax refund check. The IRS started taking in federal income tax returns for the 2022 tax year on January 23, 2023.
The IRS has made commendable progress in the speed at which they are disposing of the files this year. But the average income tax refunds have gone down this year significantly as many of the federal schemes linked to the pandemic have ended in 2021. This includes the federal stimulus check, the economic impact payments, and the expanded Child Tax Credit stimulus checks. the latter was paid for only the first year before political obduracy put an end to the child-poverty alleviating measure.
The average tax refund amount from the federal government has gone down this year to $1,963 this year as revealed by an analysis of the 8M tax refunds sent as on February 3, 2023.
And Americans across the income level should expect less than what they did last year. last year close to two-thirds of filers in America were entitled to the refunds with an average amount that was a generous $3,200, according to a report by the National Taxpayer Advocate that they submitted to Congress.
For a lot of taxpayers, tax refunds are an intrinsic part of their financial calendar. And for those getting less than they got in the previous year, it becomes tougher to digest when the tax refund check is also delayed.
When Do I Get My Tax Refund
The timing of your tax refund payment depends on how you filed your tax returns. The IRS generally issued ninety percent of the tax refund payments within 3 weeks. And taxpayers who have filed their income tax returns through the electronic route will have their tax refunds deposited faster and directly into their bank accounts.
E-filing, or filing electronically, is the best way to protect your account against tax refund identity thieves. Such scammers steal your data and then utilize it to dupe you.
Going the e-file way not only protects you from identity and tax refund crimes but also ensures that you get your tax refund much earlier than you would get through the offline method.
Though the filing deadline is some way away on April 18 this year for the 2022 tax year, the earlier you file your income tax return, the faster you will receive your refund. It will also make the task of scammers and identity thieves all the more difficult to claim your money before you do.
Hasten Your Tax Refund By Adjusting Your Withholding
You will receive your tax refund even faster if you modify your tax withholding on Form W-4 and have less amount taken from your paychecks for taxes.
We rarely give much thought to the many forms we fill out when we join a new job. But we are likely to have filled out a W-4 form, which helps determine how much of your income your employer will withhold, or retain from your paycheck to pay your federal taxes.
A bigger liability means a smaller paycheck, but it could also ensure a bigger tax refund. Too little tax withhold will lead to liability at tax time instead of a tax refund.
So it is about adjusting the correct amount. A tax refund is not always a good thing when you are getting what you deposited through the tax year in the first place. It is especially a losing proposition if it is huge. A huge refund can mean that you have blocked a substantial sum and given an interest-free loan to the federal administration.
Even if your withholding amount is right at a certain point, your needs might change. You get it right through Form-4, though it rarely accounts for personal changes.
Time For Adjusting Your Withholding
For those who have already filled out the W-4 form, you can still adjust your tax withholding at any time of the year. Some particular development can trigger a tax withholding checkup. It includes getting a very large tax refund, getting married and moving from individual to joint filing, getting divorced, and filing as an individual instead of jointly.
Having children or taking on adult dependents, such as a parent, or starting a second job or side hustle can also trigger tax withholding checkups. A spike in earnings thanks to a bonus or a raise is also a reason to check your withholding amount.
Workers who work remotely should also pay particular attention to their W-4. This is especially important for workers changing states or if they work in different states from their employer. These are vital aspects that need to be looked at and reviewed at withholding.
For those who regularly receive larger tax refunds, you should consider bringing down your withholding amount. By this, you will receive more money in your regular paychecks instead of having to wait for more than a whole year to receive it as a refund at tax time.
But it is not a good idea to considerably reduce your entire withholding and play to pay it at tax time. It is particularly imprudent to reduce tax withholding during tough times and points to wrong financial practice. It could invite penalties for too low withholding. The IRS Tax Withholding Estimator gives a good idea of what your ideal withholding amount should be.
When you owe taxes at the end of the year, you should consider increasing the withholding amount. For some, it comes as a kind of forced savings, even if it does not gather any interest.
A section of finance considers withholding as something negative. But others say that the concept of forced savings is useful for low and moderate-income families as a strong refund pays for vacations, real estate taxes, and other big expenses, even though the government doesn’t pay any interest on such savings.