The 2021 tax season started around two weeks later than normal this year due to the latest changes to the federal tax law. However, the delay should not affect when your tax refund will arrive. The majority of taxpayers should receive their tax refund within 21 days of filing it. The Internal Revenue Service (IRS) expects to deliver the first round of refunds in the first week of March. This corresponds to the timeframe in which the registration season opened in January.
While it’s impossible to predict the exact day your tax refund will arrive, there are a few factors that can affect your length of time.
The central theses
- You may get a refund if you’ve overpaid your 2020 income tax or applied for a non-refundable tax credit.
- Taxpayers filing electronically and requesting a direct deposit will receive their refund first.
- The IRS provides a tool that will allow you to track and view the current status of your refund.
How tax refunds work
A tax refund is a refund for taxes paid during the year. Most workers pay their federal income taxes upfront through their paychecks or by filing quarterly estimated taxes.
Employees must complete an Employee’s Withholding Certificate (W-4) if they work for a company. The information entered on an employee’s Form W-4 determines how much their employer withholds from their salary to cover federal income taxes. If the employer withholds too much, the taxpayer can get a tax refund. If you come up short, you will have to pay taxes.
Contract workers are considered both an employee and an employer. You are not completing a Form W-4. Instead, they have to pay their own taxes every quarter. The estimated tax payments for 2021 are due April 15, 2021. June 15, 2021; September 15, 2021; and January 18, 2022. (It’s January 18, not January 15, as the latter is a Saturday that is not a business day, and Monday January 17 is Martin Luther King Jr. Day, a federal holiday .) This also applies if the deadline for filing taxes for individual income taxes for 2020 has been postponed to May 17, 2021.
You can also get a tax refund when you apply for a refundable tax credit, e.g. B. Earned Income Tax Credit (EITC). Most federal tax credits are non-refundable and only reduce the amount of tax you owe. However, if you apply for a refundable tax credit that is greater than the amount you owe, you will receive the difference as a tax refund.
Although the IRS has extended the deadline for filing and paying taxes for 2020 to May 17th due to the COVID-19 pandemic, estimated tax payments for taxes for 2021 are still due on April 15th.
Factors That Can Affect Timing
Taxpayers can choose how to file their tax return and receive their refund. How you file your taxes will determine how quickly your return will be processed.
The IRS encourages taxpayers to file their tax returns electronically and receive their refund via direct deposit. This way, you will likely get your refund faster than someone filing a return through the mail and requesting a paper check. This is especially true for the 2021 tax season as both the IRS and the U.S. Postal Service have experienced delays due to COVID-19. (An applicant known to Investopedia submitted a response for 2019 by mail on July 8, 2020, one week before the July 15, extended by COVID, and did not receive his tax refund check until February 18, 2021.)
In some cases, you may receive your refund by check even after requesting a direct deposit. According to the IRS, this could happen if:
- You request that the refund be deposited electronically into an account owned by someone other than you or your spouse
- Your bank declines the transaction
- You are requesting more than three electronic refunds to be deposited into a single bank account
(This also happened to the above filer requesting a direct deposit. The reason, according to the IRS, was that “Direct deposit requests for prior years cannot be considered.” As it was a 2019 tax refund Paid in 2021, the IRS had to send a check, even though the delay was the IRS, not the filer’s.)
Your tax refund may be delayed if your return is incomplete, contains errors, is subject to fraud, identity theft, or requires further verification. There are also certain items that may delay your refund. For example, tax returns that contain Form 8379 (Injured Spouse Assignment) can take up to 14 weeks to process.
If you claim certain tax credits, you will not receive your tax refund until the first week of March at the earliest. The 2015 Act to Protect Americans from Tax Hikes (PATH) prohibits the IRS from issuing refunds to taxpayers who apply for the EITC or Child Additional Tax Credit (ACTC) before mid-February.
How to Track Your Tax Refund
The IRS provides a “where’s my refund?” Tool To that can show the status of your return if you haven’t received it. You can use the tool to access your refund information within a day of submitting it electronically, or about a month after your return has been sent in the mail.
The Where’s My Refund Tool? Is updated daily and can be found on irs.gov or in the IRS2Go app. To use the tool, you will need to provide your social security number or individual tax identification number (ITIN), your tax return status and your exact refund amount. The tool will recognize what stage your refund is currently in: Return Received, Refund Approved, Refund Sent, or any other explanation of what is happening.
(There may be significant delays in returning a return that is marked “Received.” Although the filer’s above taxes were delivered on July 16, 2020, according to U.S. Postal Tracking, the return was not processed until mid-mid as Marked “received” – December 2020. Previously it was simply listed as “unknown” status.)
Once you see that your tax refund has been approved, it will likely take a few more days for it to show as “sent”. From this point on, it should take approximately five days for your refund to arrive electronically or several weeks for it to arrive in the mail.
You should only contact the IRS directly about the status of your tax refund if:
- It has been at least three weeks since you submitted your return electronically.
- You sent your return by post more than six weeks ago.
- You have been directed to contact the IRS if you selected the “Where is my refund?” Use. Tool.
COVID-19 has also influenced this rule. As of February 25, 2021, the IRS website instructs all paper binders not to call at all as “documents sent by mail take longer to process”. However, it assures the filters that “we process all emails in the order in which we received them”.
Best ways to spend your tax refund
If you are expecting a tax refund this year, spend it wisely. Here are some ways you can use the money wisely.
- Pay credit cards– Having a credit balance on credit cards can affect your credit score and potentially prevent you from qualifying for a mortgage or other loan. Paying off your debt early can help improve your credit score and save you money on interest.
- Save for an emergency– Experts recommend keeping savings of three to six months in an emergency fund. This way you are covered in the event of job loss or other unexpected financial hardship.
- Save for retirement– In 2021, individuals can deposit up to $ 6,000 into a Traditional or Roth Individual Retirement Account (IRA). Taxpayers aged 50 or older can contribute an additional $ 1,000. Both types of accounts offer tax breaks to increase your savings.
- Save for college– If you have children or grandchildren, consider putting money in the College 529 savings plan. Your investment becomes deferred for tax purposes and withdrawals used to pay for your studies are tax-free. Every dollar you save reduces the amount the child will have to borrow for student loans.
The bottom line
To ensure that your tax refund is processed quickly, you must submit it electronically and request a direct deposit. Submitting your tax return the old-fashioned way can create unnecessary, inconvenient, and significant delays. The sooner you can get your refund, the sooner you can start investing it.