The IRS has announced that, due to the COVID-19 pandemic, they will not begin processing income tax returns until January 24th. So if you are expecting a refund, you will want to start the return process as soon as possible. As of December 2021, they had 6 million unprocessed individual income tax returns for 2020.
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People are encouraged to use the online resources available through the IRS website instead of calling. It’s reported the IRS phone systems received over 145 million calls from January 1st- May 17th last year, four times more than a typical year.
Key information to get your refund quickly:
- File online. Pushing paper is not the IRS’ forte. Instead, most taxpayers use the standard deduction, which streamlines their return, making electronic filing relatively easy. The IRS anticipates that most taxpayers who file online will receive their refund within 21 days of electronically filing, as long as there are no issues with the return and direct deposit was used.
- Prepare early. Do not wait. Begin gathering information needed for your return now. For taxpayers making $73,000 or less in 2021, the IRS Free File program will open on January 14th. Look at your last years’ return as a guide for this year.
- Extra care for accuracy. If you received an economic impact payment or the advance child tax credit in 2021, make sure you report those monies accurately. Making a mistake will ‘kick the return out of the system,’ requiring a manual review…and potentially significant delays.
- Use Direct Deposit. Have the IRS deposit your refund directly into your bank account rather than requesting a refund via snail mail.
Did you receive economic income payments or advance child tax payments?
By law, the IRS can’t issue a refund involving the Earned Income Tax Credit or Additional Child Tax Credit before mid-February to allow additional time to help the IRS stop fraudulent refunds from being issued. However, eligible people can file their returns starting January 24th to get ahead of the game.
What you need to know:
The IRS says it will send recipients of these payments a recap in the form of IRS Letter 6419. So here’s what you should do:
- Wait for the letter. If possible, wait for the letter before you file since it contains the IRS’ record of what you received in form of economic income payments and advance child tax payments.
- Double-check for accuracy. Check your records of receipt of funds against the IRS’ record. Hopefully, they match.
- Get professional help if needed. For example, if there is a discrepancy between your records and the IRS letters, seek help from your tax advisor before filing.
The tax filing deadline, usually April 15th each year, is postponed until Monday, April 18th, due to Emancipation Day. Last year’s average tax refund was $2,800. This year, the IRS expects most tax filers to receive their refund within twenty-one days of filing electronically, assuming they use direct deposit.
Remember filing electronically, choosing direct deposit, and providing an accurate return is the name of the game if you want your refund as soon as possible. For more details on tax filing guidelines, visit IRS.gov or reach out to your tax professional.
Stewart H. Welch, III, CFP®, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including 50 Rules of Success; J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. For more information, visit The Welch Group. Consult your financial advisor before acting on comments in this article.
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