Economy & Jobs
How Delayed Tax Refunds Might Affect You
IRS Commissioner John Koskinen made headlines at the beginning of this year’s tax season when an internal e-mail was released, revealing that millions of taxpayer returns might be delayed. Budget cuts, which among other obstacles have reduced overtime and temporary staff hours, are affecting more than just the IRS internally. Taxpayers won’t receive as much help from the IRS, predicted Koskinen. Ultimately, these budget cuts will subject some taxpayers to delayed tax refunds.
This news may be alarming for the nearly 8 in 10 taxpayers who receive a refund each year, particularly since people often pay bills or make big-ticket purchases with their refund checks. If you’re counting on this money to help you stay financially afloat this spring, every extra day of waiting for a delayed refund could hurt your bottom line.
Despite the bad news, some options are available for taxpayers who need their refund sooner rather than later:
- E-file: Most years, the IRS aims to issue returns to e-filers within 21 days of receipt of the tax return. The agency still plans to meet that deadline for 9 out of every 10 refunds this tax season. Paper filers, who generally need to wait four to six weeks for their refund check, may be waiting by their mailbox for at least seven weeks this year. If you have never e-filed, this is a great year to try it.
- Aim for an error-free return: While you never want to file an incorrect return, any errors or questions that require additional manual review from the IRS will likely mean a delay in your refund. This puts taxpayers in something of a Catch-22, since Koskinen expects less than half of taxpayer calls to the IRS customer service helpline to get through. If you can afford the help of a reputable tax preparer, this is definitely the year to use one.
- Sign up for direct deposit: According to the IRS, combining e-filing with direct deposit of your refund into a bank account or prepaid debit card is the fastest way to get your money.
- Track your refund: The IRS offers taxpayers individual information about when to expect their refund through Where’s My Refund? or the IRS2Go mobile app. Taxpayers can check the status of their returns within 24 hours of e-filing their tax return.
Organic Savings and Adjusted Withholdings
Ultimately, the best way to handle potential delayed tax refunds in the future is to keep more money in your pocket with each paycheck. This happens organically for taxpayers in low- or no-income tax states, since they keep more of their hard-earned dollars every payday. Savvy taxpayers in those states might use the money they’d otherwise send to their state government to fund an emergency savings account. They’ll have less need for a fat refund check each spring.
Whether you live in a state that levies income tax or one that doesn’t, it’s a good idea to adjust your withholding for 2015 so that you can keep more money in your pocket, rather than giving Uncle Sam an interest free loan. When you’re with your HR representative filling out a revised W-4 for the adjusted withholding, ask for a direct deposit slip, as well. You can have the amount you save each paycheck automatically transferred to your savings account—making any future refund delays no big deal.
Life’s full of delays, but when it comes to your finances, a small delay could mean missed payments. Guard yourself accordingly with some of the above options and plan for next year with these delays in mind.