Tax Credits for Energy-Efficient Home Improvements

Taxpayers making certain energy-efficient updates to their homes are reminded that they could qualify for home energy tax credits. The credit amounts and types of qualifying expenses were expanded by the Inflation Reduction Act of 2022. Taxpayers who make energy improvements to a residence may be eligible for expanded home energy tax credits.

What Taxpayers Need To Know

Taxpayers can claim two tax credits for the year the qualifying expenditures are made: the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit. Before purchasing energy-efficient equipment, taxpayers are encouraged to review all requirements and qualifications at IRS.gov/homeenergy. Additional information is also available on energy.gov, which compares the credit amounts for tax year 2022 and tax year 2023.

Homeowners making improvements to their primary residence will benefit the most from these tax credits; however, renters may also be able to claim credits, as well as owners of second homes used as residences. Landlords cannot claim this credit. Let’s take a closer look at how these credits work:

Energy Efficient Home Improvement Credit

Under the Inflation Reduction Act, taxpayers that make qualified energy-efficient improvements to their home after January 1, 2023, may qualify for a tax credit of up to $3,200 for the tax year the improvements are made. Beginning January 1, 2023, the credit equals 30% of certain qualified expenses:

1. Qualified energy efficiency improvements installed during the year, which can include things such as:

  • iExterior doors, windows and skylights.
  • Insulation and air sealing materials or systems.

2. Residential energy property expenses such as:

  • Central air conditioners.
  • Natural gas, propane, or oil water heaters.
  • Natural gas, propane or oil furnaces, and hot water boilers.

3. Heat pumps, water heaters, biomass stoves, and boilers.

4. Home energy audits of a main home.

The maximum credit that can be claimed each year is:

  • $1,200 for energy property costs and certain energy-efficient home improvements, with limits on doors ($250 per door and $500 total), windows ($600), and home energy audits ($150).
  • $2,000 annually for qualified heat pumps, biomass stoves, or biomass boilers.

The credit is available only for qualifying expenditures to an existing home or for an addition or renovation of an existing home and not for a newly constructed home. The credit is nonrefundable, which means taxpayers cannot get back more from the credit than what is owed in taxes, and any excess credit cannot be carried to future tax years.

Residential Clean Energy Credit

Taxpayers who invest in energy improvements for their main home, including solar, wind, geothermal, fuel cells, or battery storage, may qualify for an annual residential clean energy tax credit. Taxpayers may be able to claim a credit for certain improvements other than fuel cell property expenditures made to a second home that they live in part-time and don’t rent to others.

The Residential Clean Energy Credit equals 30% of the costs of new, qualified clean energy property for a home in the United States installed anytime from 2022 through 2033.

Qualified expenses include the costs of new, clean energy equipment such as:

  • Solar electric panels.
  • Solar water heaters.
  • Wind turbines.
  • Geothermal heat pumps.
  • Fuel cells.
  • Battery storage technology (beginning in 2023).

Clean energy equipment must meet the following standards to qualify for the Residential Clean Energy Credit:

  • Solar water heaters must be certified by the Solar Rating Certification Corporation or a comparable entity endorsed by the applicable state.
  • Geothermal heat pumps must meet Energy Star requirements in effect at the time of purchase.
  • Battery storage technology must have a capacity of at least 3-kilowatt hours.

The credit is available for qualifying expenditures incurred for installing new clean energy property in an existing or newly constructed home. This credit has no annual or lifetime dollar limit except fuel cell property. Taxpayers can claim this credit each tax year they install eligible property until the credit begins to phase out in 2033.

This is a nonrefundable credit, which means the credit amount received cannot exceed the amount owed in tax. Taxpayers can carry forward any excess unused credit and apply it to any tax owed in future years.

Taxpayers should use Form 5695, Residential Energy Credits, to claim the credit. This credit must be claimed for the tax year when the property is installed, not just purchased.

Keeping Good Records is Essential

Taxpayers are reminded that it is important to keep all receipts and records of purchases and expenses when the improvements are made to assist them in claiming the applicable credit during tax filing season. If you have any questions about home energy tax credits, please call.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

July 17 Deadline for Unclaimed 2019 Tax Refunds

Nearly $1.5 billion in refunds remain unclaimed because some people haven’t filed their 2019 tax returns yet. Under the law, taxpayers usually have three years to file and claim their tax refunds. If they don’t file within three years, the money becomes the property of the U.S. Treasury.

However, for 2019 tax returns, people have more time than usual to file to claim their refunds. Normally, the filing deadline to claim old refunds falls around the April tax deadline, which is April 18 this year for 2022 tax returns. But the three-year window for 2019 unfiled returns was postponed to July 17, 2023, due to the COVID-19 pandemic emergency. Taxpayers who don’t file could be missing out on an average median refund of $893 for 2019.

These unclaimed refunds could include more than just a refund of taxes withheld or paid during 2019. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2019, the credit was worth as much as $6,557. The EITC helps individuals and families whose incomes are below certain thresholds in 2019. Those who are potentially eligible for EITC in 2019 had incomes below:

  • $50,162 ($55,952 if married filing jointly) for those with three or more qualifying children;
  • $46,703 ($52,493 if married filing jointly) for people with two qualifying children;
  • $41,094 ($46,884 if married filing jointly) for those with one qualifying child, and;
  • $15,570 ($21,370 if married filing jointly) for people without qualifying children.

Taxpayers should note that for those seeking a 2019 tax refund, their checks may be held if they have not filed tax returns for 2020 and 2021. In addition, the refund will be applied to any amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or past-due federal debts, such as student loans.

Still need to file a 2019 tax return? Help is just a phone call away.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

HSA Limits Increase for 2024

Contributions to a Health Savings Account (HSA) are used to pay the current or future medical expenses of the account owner, their spouse, and any qualified dependent and are adjusted annually for inflation. For 2024, the annual inflation-adjusted contribution limit for a Health Savings Account (HSA) increases to $$4,150 for individuals with self-only coverage (up $300 from 2023) and $8,300 for family coverage (up $550 from 2023). The additional catch-up contribution for individuals aged 55 or older before the end of the tax year remains at $1,000.

To take advantage of an HSA, individuals must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance, with the exception of insurance for accidents, disability, dental care, vision care, or long-term care. Medical expenses such as deductibles, copayments, and other amounts (excluding premiums) must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.

For the calendar year 2024, a qualifying HDHP must have a deductible of at least $1,600 for self-only coverage or $3,200 for family coverage (up $100 and $200, respectively, from 2023) and must limit annual out-of-pocket expenses of the beneficiary to $8,050 for self-only coverage and $16,100 for family coverage, an increase of $550 and $1,100, respectively, from 2023. As with contribution limits, deductibles and out-of-pocket expenses are adjusted for inflation annually.

Don’t hesitate to contact the office if you have questions about Health Savings Accounts.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

What To Do if You Receive an IRS CP2000 Notice

An IRS CP2000 notice is mailed to a taxpayer when income reported from third-party sources such as an employer, bank, or mortgage company does not match the income reported on the tax return.

It is not a tax bill or a formal audit notification; it merely informs you about the information the IRS has received and how it affects your tax. It is, however, important to pay attention to what your CP2000 notice states because interest accrues on your unpaid balance until you pay it in full.

What to Do

If you receive a CP2000 notice in the mail, complete the response form. If your notice doesn’t have a response form, then follow the notice instructions. Generally, you must respond within 30 days of the date printed on the notice. However, you may request additional time to respond, and if you cannot pay the full amount that you owe, you can set up a payment plan with the IRS.

If the information on the CP2000 notice is not correct, then check the notice response form for instructions on what to do next. You also may want to contact whoever reported the information and ask them to correct it.

If the information is wrong because someone else is using your name and social security number, please contact the IRS and let them know. You can also use the link on the IRS Identity theft information web page to learn more about what you can do.

If you do not respond, the IRS will send another notice. If the IRS does not accept the information provided, it will send IRS Notice CP3219A, Statutory Notice of Deficiency, which includes information about how to challenge the decision in Tax Court.

Do I Need To Amend My Return?

If the information displayed in the CP2000 notice is correct, you don’t need to amend your return unless you have additional income, credits, or expenses to report. If you agree with the IRS notice, follow the instructions to sign the response page and return it to the IRS in the envelope provided.

If you have additional income, credits, or expenses to report, complete and submit a Form 1040-X, Amended U.S. Individual Income Tax Return. If you need assistance with this, please call the office.

How To Avoid Receiving an IRS CP2000 Notice:

  • Keep accurate and detailed records.
  • Wait until you receive your income statements before filing your tax return.
  • Check the records you receive from your employer, mortgage company, bank, or other sources of income (W-2s, 1098s, 1099s, etc.) to ensure they are correct.
  • Include all your income on your tax return, including that from a second job or fees derived from the sharing economy (e.g., renting a spare room out on Airbnb).
  • Follow the instructions for reporting income, expenses, and deductions.
  • File an amended tax return for any information you receive after you’ve filed your return.
  • Use a professional tax preparer who will help you avoid mistakes and find credits and deductions you may qualify for.

If you have questions about IRS notices, help is just a phone call away.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Avoiding a Tax Surprise When Retiring Overseas

Are you approaching retirement age and wondering where you can retire to make your retirement nest egg last longer? Retiring abroad may be the answer. But first, it’s important to look at the tax implications — because not all retirement country destinations are created equal.

Taxes on Worldwide Income

Leaving the United States does not exempt U.S. citizens from their U.S. tax obligations. While some retirees may not owe any U.S. income tax while living abroad, they must still file a return annually with the IRS – even if all of their assets were moved to a foreign country. The bottom line is that you may still be taxed on income regardless of where it is earned.

Unlike most countries, the United States taxes individuals based on citizenship, not residency. As such, every U.S. citizen (and resident alien) must file a tax return reporting worldwide income (including income from foreign trusts and foreign bank and securities accounts) in any given taxable year that exceeds threshold limits for filing.

The filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the foreign earned income exclusion or the foreign tax credit, substantially reducing or eliminating U.S. tax liability.

These tax benefits are not automatic and are only available if an eligible taxpayer files a U.S. income tax return.

Any income received or deductible expenses paid in foreign currency must be reported on a U.S. return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Also, retired taxpayers may have to file tax forms in the foreign country where they reside. You may, however, be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.

Nonresident aliens who receive income from U.S. sources must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens is generally April 15.

FBAR Reporting

U.S. persons who own a foreign bank account, brokerage account, mutual fund, unit trust, or another financial account are required to file a Report of Foreign Bank and Financial Accounts (FBAR) by April 15 if they have:

  • Financial interest in, signature authority or other authority over one or more accounts in a foreign country, and
  • The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

A foreign country does not include territories and possessions of the United States, such as Puerto Rico, Guam, the United States Virgin Islands, American Samoa, or the Northern Mariana Islands.

Income From Social Security or Pensions

If Social Security is your only income, your benefits may not be taxable, and you may not need to file a federal income tax return. If you receive Social Security, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits. Likewise, you should receive a Form 1099-R for each distribution plan if you have pension or annuity income.

Retirement income is generally not taxed by other countries. As a U.S. citizen retiring abroad who receives Social Security, for instance, you may owe U.S. taxes on that income but may not be liable for tax in the country where you’re spending your retirement years.

However, if you receive income from other sources (either U.S. or country of retirement), from a part-time job or self-employment, for example, you may have to pay U.S. taxes on some of your benefits. Each country is different, and you may also be required to report and pay taxes on any income earned in the country where you retired.

Foreign Earned Income Exclusion

If you’ve retired overseas but take on a full or part-time job or earn income from self-employment, the IRS allows qualifying individuals to exclude all, or part, of their incomes from U.S. income tax by using the Foreign Earned Income Exclusion (FEIE). In 2023, this amount is $120,000 per person. If two individuals are married and work abroad and meet either the bona fide residence test or the physical presence test, each one can choose the foreign-earned income exclusion. Together, they can exclude as much as $240,000 for the 2023 tax year.

Income earned overseas is exempt from taxation only if certain criteria are met, such as residing outside of the country for at least 330 days over 12 months or an entire calendar year.

Tax Treaties

The United States has income tax treaties with many foreign countries, but these treaties generally don’t exempt residents from their obligation to file a tax return. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate or are exempt from U.S. income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income.

Treaty provisions are generally reciprocal and apply to both treaty countries. Therefore, a U.S. citizen or resident who receives income from a treaty country and is subject to taxes imposed by foreign countries may be entitled to certain credits, deductions, exemptions, and reductions in the rate of taxes of those foreign countries.

State Taxes

Many states also tax resident income, so even if you retire abroad, you may still owe state taxes unless you established residency in a no-tax state before you moved overseas. Some states honor the provisions of U.S. tax treaties; however, some states do not. Therefore it is prudent to consult a tax professional for advice.

Relinquishing U.S. Citizenship

Taxpayers who relinquish their U.S. citizenship or cease to be lawful permanent residents of the United States during any tax year must file a dual-status alien return and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with Internal Revenue Service by the tax return’s due date (including extensions).

Giving up your U.S. citizenship doesn’t mean giving up your right to receive social security, pensions, annuities, or other retirement income. However, the U.S. Internal Revenue Code (IRC) requires the Social Security Administration (SSA) to withhold nonresident alien tax from certain Social Security monthly benefits. Unless you qualify for a tax treaty benefit, as a nonresident alien receiving social security retirement income, SSA will withhold a 30 percent flat tax from 85 percent of those benefits. This results in a withholding of 25.5 percent of your monthly benefit amount.

Consult a Tax Professional Before You Retire

Don’t wait until you’re ready to retire to consult a tax professional. Call the office today and find out what your options are well in advance of your planned retirement date.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Tax Withholding for Seasonal and Part-Time Employees

Many businesses hire part-time or full-time workers, especially in the summer. The IRS classifies these employees as seasonal workers, defined as employees performing labor or services on a seasonal basis (i.e., six months or less). Examples of this kind of work include retail workers employed exclusively during holiday seasons, sports events, or during the harvest or commercial fishing season.

Part-time and seasonal employees are subject to the same tax withholding rules that apply to other employees and all taxpayers should fill out a W-4 when starting a new job. Employers use this form to determine the amount of tax to be withheld from your paycheck. Taxpayers (including students) with multiple summer jobs will want to ensure all their employers withhold adequate taxes to cover their total income tax liability.

Changes To Withholding Under Tax Reform

The Tax Cuts and Jobs Act changed the tax law in 2018, and included increasing the standard deduction, eliminating personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions, and changing the tax rates and brackets. Taxpayers returning to the workforce, working part-time, or with seasonal jobs, may not be aware of the changes in tax law that could affect their paycheck.

If you’ve recently started a part-time seasonal job, now is an excellent time to perform a “paycheck check-up” using the Withholding Calculator, a special tool on the IRS website that can help taxpayers with part-year employment estimate their income, credits, adjustments, and deductions more accurately. It also checks to see whether a taxpayer is having the correct amount of tax withheld for their financial situation.

Using the Withholding Calculator

  • First, the calculator asks about a taxpayer’s employment dates and accounts for a part-year employee’s shorter employment rather than assuming that their weekly tax withholding amount would be applied to a full year.
  • Next, the calculator makes recommendations for part-year employees accordingly. If a taxpayer has more than one part-year job, the Withholding Calculator can also account for this.

Taxpayers should have a completed prior-year tax return and need their most recent pay stub before using the Withholding Calculator.

Calculator results depend on the accuracy of information entered. If a taxpayer’s circumstances change during the year, they should return to the calculator to check whether they should adjust their withholding. For taxpayers working for only part of the year, it’s best to do a “paycheck check-up” early in their employment period so their tax withholding is most accurate.

The Withholding Calculator does not request personally identifiable information, such as name, Social Security number, address, or bank account numbers. The IRS does not save or record the information entered on the calculator. As always, taxpayers should watch out for tax scams, especially via email or phone, and be alert to cybercriminals impersonating the IRS. Remember, the IRS does not send emails about the calculator or the information entered.

If You Need To Adjust Your Withholding

If the calculator results indicate a change in withholding amount, the employee should complete a new Form W-4 and submit it to their employer as soon as possible. Employees with a change in personal circumstances that reduces the number of withholding allowances should submit a new Form W-4 with corrected withholding allowances to their employer within ten days of the change.

As a seasonal or part-time worker, you may not be required to file a federal or state return if the wages you earn at a part-time or seasonal job are less than the standard deduction; however, if you work more than one job, you may end up owing tax.

As you can see, seasonal and part-time workers have unique tax situations. If you have any questions about your tax situation, don’t hesitate to call the office today.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Congratulations to Linh Nguyen on Passing Her CPA Exams!

Linh Nguyen

Wheeler is thrilled to congratulate Linh Nguyen on passing her final CPA exam, closing out a daunting chapter in her path to CPA licensure.

Linh has spent the last 9 months committed to this CPA journey while dealing with 3 tax seasons (9/15, 10/15, and 4/15), which took an incredible amount of time and energy. Passing the last of her exams means no more 10-hours of studying on weekends! She’s looking forward to being available to spend more time with family and friends now that it’s behind her.

Linh Nguyen
Linh Nguyen passes all CPA exams!

When asked about the toughest part, Linh shared that Audit was the most difficult exam because memorizing the materials by heart does not guarantee a pass. “We need to know how to apply the materials and make real judgments.” A tip for those looking to take this exam: “One effective way to prepare for the test better, [was] to do several sets of multiple-choice questions, write down the concepts I was not sure about and use them as review materials minutes before taking the exam.”

Linh’s best advice is to find a study method that works for you. A little background on her CPA journey: “I applied to sit for the exam in 2019 and was studying for the first exam on and off for 3 years but never took it because I never felt ready. Until I developed my own system of studying, [then] it took me 5-6 weeks to prepare for each exam and pass them on first try. So, if you ever have doubts in yourself, it is not that you are not good enough, it is just you haven’t found what works for you.”

Now that Linh is done with her CPA exams, she can’t wait to start her NEXT journey, the Master of Science in Taxation program at San Jose State University. This will give her the rest of her credits toward licensure and be a major accomplishment in and of itself. We’re proud to have Linh on the team and are cheering her on in her next season!

Certain Taxpayers May Need to File an Amended Return

Taxpayers who reported certain state 2022 tax refunds as taxable income may need to file an amended tax return. Affected taxpayers include those who filed before February 10, 2023, and meet certain requirements. Taxpayers who used a tax professional should consult with them to determine whether an amended return is necessary.

Background

Details clarifying the federal tax status regarding special payments made to taxpayers by 21 states in 2022 were clarified by the IRS on February 10, 2023. During their review, it was determined that the IRS would not challenge the taxability of state payments related to general welfare and disaster relief in the interest of sound tax administration and other factors. As a result, taxpayers in many states did not need to report these payments on their 2022 federal tax returns.

Which Taxpayers are Affected?

Taxpayers in the following states do not need to report these state payments on their 2022 tax return: Alaska (applies only to the special supplemental Energy Relief Payment), California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island.

Also, many people in Georgia, Massachusetts, South Carolina, and Virginia will not include special state 2022 tax refunds as income for federal tax purposes if they meet certain requirements. For these individuals, state payments will not be included for federal tax purposes if the payment is a refund of state taxes paid and the recipient either claimed the standard deduction for tax year 2022 or itemized their tax year 2022 deductions but did not receive a tax benefit.

Taxpayers can also view a listing of individual states and the federal tax treatment of their special state refunds or rebates listed on this State Payments chart at IRS.gov.

What Taxpayers Should Do Next

Before filing an amended return, taxpayers who filed before February 10 in these areas and met these requirements should check their tax return to make sure they paid tax on a state refund. If an amended return is needed, taxpayers who submitted their original 2022 tax return electronically can also file their amended return electronically and may select direct deposit for any resulting refund. Electronic filing cuts out the mail time, and including direct deposit information on an electronically submitted form provides a convenient and secure way to receive refunds faster.

Taxpayers also have the option to submit a paper version of Form 1040-X, Amended U.S Individual Income Tax Return, and receive a paper check. Direct deposit is not available on amended returns submitted on paper, however. Taxpayers should follow the instructions for preparing the paper form and mail the amended return to:

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0052

As always, don’t hesitate to contact the office if you have questions about this or any other tax topics affecting your tax situation.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Small Business: Choosing a Payroll Service Provider

When choosing a payroll service provider to handle payroll and payroll tax, employers should choose a trusted payroll service to help them avoid missed deposits for employment taxes and other unpaid bills. Typically, these clients remain legally responsible for paying the taxes due, even if the employer sent funds to the payroll service provider for required deposits or payments.

Employers are encouraged to enroll in the Electronic Federal Tax Payment System (EFTPS) and make sure the payroll service provider uses EFTPS to make tax deposits. EFTPS is free and gives employers safe and easy online access to their payment history, provided they make deposits under their Employer Identification Number (EIN). Using the EFTPS enables them to monitor whether their payroll service provider meets its tax deposit responsibilities.

Employers have two options when finding a trusted payroll service provider:

  • A certified professional employer organization (CPEO). Typically, CPEOs are solely liable for paying the customer’s employment taxes, filing returns, and making deposits and payments for the taxes reported related to wages and other compensation. An employer enters into a service contract with a CPEO, and then Form 8973, Certified Professional Employer Organization/Customer Reporting Agreement, is submitted to IRS. Employers can find a CPEO on the Public Listings page of IRS.gov.
  • Reporting agent. A reporting agent is a payroll service provider that informs the IRS of its relationship with a client using Form 8655, Reporting Agent Authorization, that the client signs. Reporting agents must deposit a client’s taxes using the Electronic Federal Tax Payment System (EFTPS) and can exchange information with the IRS on behalf of a client if issues arise. They are also required to provide clients a written statement reminding the employer that it, not the reporting agent, is ultimately responsible for the timely filing of returns and payment of taxes.

Employers should contact a tax professional about any bills or notices received, especially payments managed by a third party. They can also call the phone number on the bill, write to the IRS office that sent the bill, or contact the IRS business tax hotline at 800-829-4933.

Most payroll service providers provide quality service, but some don’t. Each year, a few payroll service providers don’t submit their client’s payroll taxes, close down abruptly, and leave employers on the hook.

Don’t get caught short. Choose a payroll service provider you can count on – and don’t hesitate to call the office with any questions about payroll and other business-related taxes.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Check the Status of a Tax Refund Using This IRS Tool

Taxpayers can start checking their tax refund status within 24 hours after receiving an e-filed return. The easiest and most convenient way to do this is by using the “Where’s My Refund?” tool on the IRS website. The tool also provides a personalized refund date after the return is processed and a refund is approved.

There are two ways to access the “Where’s My Refund?” tool – visiting IRS.gov/refunds or downloading the IRS2Go app. To use the tool, taxpayers will need the following information:

  • Their Social Security number or Individual Taxpayer Identification Number
  • Tax filing status
  • The exact amount of the refund claimed on their tax return

The tool displays progress in three phases: when the return was received, when the refund was approved, and when the refund was sent. When the status changes to approved, it means that the IRS is preparing to send the refund as a direct deposit to the taxpayer’s bank account or directly to the taxpayer in the mail, by check, to the address used on their tax return.

The IRS updates the “Where’s My Refund?” tool once a day, usually overnight, so taxpayers don’t need to check the status more often than that. Calling the IRS won’t speed up a tax refund. The information available on “Where’s My Refund?” is the same information available to IRS telephone assistors.

Taxpayers should remember to allow time for their financial institution to post the refund to their account or for the refund to be delivered by mail. As always, please contact the office with any questions about tax refunds, tax returns, or other tax matters.

San Jose Office: (408) 252-1800

Watsonville Office: (831) 726-8500