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Why Is My Tax Refund Delayed?

    For the majority of people, their tax refund is the most important payment of the year, and they rely on it.

    The IRS understands how important your refund is to you. It takes pleasure in paying the majority of refunds within 21 days of filing. What if your tax refund is delayed, and you’re left wondering, “When will I get my tax return (meaning your tax refund)?”

    It’s true: “Where’s my refund?” is a frequently asked question at chicastaxservice. And this article will explain why your tax refund may be delayed.

    Only for tax returns filed in 2020: Your refund could take longer than the usual 21 days, according to the IRS, if you:

    • You applied for a Recovery Rebate Credit, but the amount you claimed does not match what the IRS determines you are entitled to.
    • The lookback rule was used to determine your Earned Income Tax Credit (EITC) or Additional Child Tax Credit based on your prior-year earned income.

    If your return passes these requirements, the IRS will analyse it manually, and your refund may take an extra 90 to 120 days to arrive. You should keep checking the Where’s My Refund webpage for changes, according to the IRS.

    Additional information is available on the IRS website.

    The IRS and the US Congress are concerned about the speed with which refunds are issued. When the IRS issues refunds rapidly, there isn’t always enough time to double-check the correctness of the returns. In addition, speeding this process increases the risk of return problems and incorrect refunds.

    EITC/ACTC Tax Refunds Delayed Until Late February

    That’s why Congress gave the IRS new powers to examine refunds beginning with the 2017 tax season. Congress, in particular:

    • Employers’ deadlines for sending Forms W-2, which indicate taxpayers’ salary and the income tax withholding they paid, and Forms 1099, which reflect payments made to independent contractors, have been pushed back. The deadline for submissions is January 31.
    • Refunds with the earned income credit (EIC) and/or the supplementary child tax credit are delayed (ACTC). Although the IRS is unable to distribute these refunds before February 15, the IRS has stated that you should get your return within the first week of March.

    For the first time, the IRS will have the information and time it needs to scrutinise more returns before issuing refunds, thanks to the new guidelines. The IRS, on the other hand, isn’t new to questioning and delaying refunds. Several IRS compliance initiatives, in fact, take or detain millions of taxpayers’ refunds each year. Here are a few reasons why your tax refund can be late:

    Reason #1: The Internal Revenue Service (IRS) has taken your refund.

    When the IRS issues refunds, it typically takes or decreases refunds (offsets) when filers owe money. The following are the two most prevalent scenarios:

    You owe federal taxes, and you haven’t paid:

    You’ll find out if the IRS used your refund to pay federal taxes you owe a few weeks after you file your return. Overpayment Applied to Taxes Owed will be the subject of IRS notice CP49. If you don’t believe you owe the IRS what it claims you owe, your sole option is to file an updated tax return to remedy the error or fight any additional tax the IRS has charged you (like a tax bill from an audit or an underreporting notice).

    Find out what to do if you can’t afford to pay your taxes.

    You owe other debts, and you haven’t paid:

    If you owe other sorts of debts, including non-tax bills, the IRS can remove or reduce your refund under the Treasury Offset Program (TOP).

    • Child support arrears
    • Payments from other federal agencies
    • Taxes paid by the state
    • Repayments of unemployment benefits

    The IRS is unable to provide information or resolve disputes over TOP debts. For more information, taxpayers should call TOP at (800) 304-3107.

    Non-responsible spouses can receive a portion of the return.

    If you filed jointly with your spouse and the IRS deducted your entire refund to cover your partner’s debts, you are entitled to your share of the refund. Use Form 8379, Injured Spouse Allocation, to file an injured spouse claim.

    Reason #2 – IRS Holding Your Refund

    In a variety of circumstances, the IRS may place a hold on your return and request additional information from you. This doesn’t imply you’re being audited, but if you don’t respond with all of the information by the deadline, you might be.

    Here are six of the most common reasons for the IRS to put your return on hold:

    The IRS noted a “math error” on your return after you mailed it in:

    When taxpayers e-file their returns, the e-file procedure detects and rejects numerous return problems at the time of filing. If you send your return rather than e-file it, the IRS is more likely to catch a problem later.

    The IRS refers to the majority of these blunders as “math errors,” but they aren’t confined to arithmetic faults. The IRS has the authority to adjust any associated deductions or credits if your Social Security Number (SSN) or the information of your dependents does not match IRS records (like the deduction for your dependent, the EITC or the child and dependent care credit). If you forget to attach a relevant schedule or form to substantiate a deduction or credit, the IRS can alter your return.

    If the IRS makes a change to your return, you’ll receive a letter (typically IRS notice CP21) telling you that you have 60 days to fix the problem. The IRS change is final if you don’t present enough explanation and information. You’ll have to update your return and follow up with the IRS to obtain your refund at that point.

    Identity theft is suspected by the IRS:

    IRS identity theft filters can cause returns and refunds to be delayed until taxpayers confirm their identities. If this happens, you’ll most likely receive IRS Letter 5071C, which will require you to confirm your identification. You can verify your identity by giving the IRS Taxpayer Protection Program unit with information from last year’s return, your current-year return, and your current-year Forms W-2 and 1099 until the IRS reinstates its online identity verification process.

    The IRS is disputing the following tax credits you claimed:

    If the IRS determines that you are not qualified to claim the EITC, ACTC, advanced payments of the premium tax credit, or American Opportunity Tax Credit based on its return screening filters, your refund may be delayed and you may be asked for additional information.

    This is an IRS audit in the strictest sense. If the IRS questions your EITC claim, you’ll receive Letter CP75, which will ask for proof that you qualify. See Form 886-H-EIC, Documents You Must Send to Claim the Earned Income Credit for Tax Year 2015 on the Basis of a Qualifying Child or Children, for an example.

    The Internal Revenue Service noted the following potential ACA health insurance issues:

    It’s only been a few years since the Affordable Care Act mandated that all taxpayers obtain health insurance coverage, as well as the establishment of health insurance marketplaces where taxpayers can purchase insurance and receive tax credits to help with premium costs.

    In 2017, the IRS began collecting millions of information statements (Forms 1095-A, -B, and -C) from taxpayers regarding their health insurance coverage, as well as information about any tax credits they may have received.

    This information could be used by the IRS to challenge the veracity of tax returns and perhaps delay tax refunds. If there are discrepancies on your return, or if the advance payments of the premium tax credit have not been reconciled, the IRS may seek additional information from you to complete your return (Letter 12C), or even initiate an audit to assess penalties for not having needed insurance coverage. If your insurance coverage reporting contradicts with the IRS’s Forms 1095 on file, the IRS may challenge your return after you’ve filed it.

    You must file an old tax return:

    When the IRS pursues back tax returns, any refunds you may be due are put on hold until you file the old return. The only option to resolve this situation and receive your refund is to file a past-due return. The IRS will deduct the amount owed on your previous return from your current-year refund.

    You’re being audited for a previous year:

    The IRS has the authority to postpone your tax refund until any audits are completed. This is most prevalent when the IRS conducts a mail audit on a prior year’s EITC or ACTC return. Normally, you’ll receive IRS Letter CP88 notifying you that your refund has been frozen pending the outcome of the audit. If you provide the needed information by the deadline, the IRS will usually complete the audit and return your refund within six months.

    Handling a Refund Delay – Do Your Research and Respond Right Away

    If the IRS is delaying your return, you’ll need to figure out why and work with the agency to get your money back as soon as possible. Refund holds often feel like audits, so this can be a difficult task. However, be patient and unconcerned. If your tax return is correct, all you have to do now is explain everything to the IRS (and possibly provide some evidence).

    The best course of action is to explore the cause of your refund hold if you receive a notice from the IRS. Here’s where you should begin.

    Obtain information about your IRS account by contacting the IRS.

    To avoid further complications, learn more about why the IRS delayed your tax refund and how to react to the IRS as soon as possible.

    Your tax professional at chicastaxservice can also assist you in determining the cause of a refund delay and communicating with the IRS on your behalf. Learn more about the tax audit and notice services offered by chicastaxservice.