Mistakes happen. What if you receive a refund from the IRS that you’re not entitled to? Or what if you receive one that’s more than you’re entitled to? How you must handle it depends on the details. A paper check refund should be voided and returned within 21 days of receipt to the address in the link below. But suppose you cashed the check. In that case, submit a personal check within 21 days to that address.
If the refund was by direct deposit, contact your bank to have them return the deposit. Also contact the IRS at the phone number in the link. Be aware that if the IRS intentionally changed your refund amount from what was on the return you filed, it will mail you a notice of explanation.
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.
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.
Tuesday, April 18, 2023, was the deadline for most taxpayers to file their tax returns. If you haven’t filed a 2022 tax return yet, it’s not too late.
First, gather any information related to income and deductions for the tax years for which a return is required to be filed, then call the office. If you are owed money, the sooner you file, the sooner you will get your refund. If you owe taxes, file and pay as soon as you can, which will stop the interest and penalties you owe.
Some taxpayers filing after the deadline may qualify for penalty relief. Those charged a penalty may contact the IRS by calling the number on their notice and explaining why they couldn’t file and pay on time.
For 2022 tax returns due April 18, 2023, some taxpayers automatically qualify for extra time to file and pay taxes due without penalties and interest, including:
Some disaster victims. Individuals living or working in a federally declared disaster area have more time to file and pay what they owe.
Taxpayers outside the United States. U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico, including military members on duty who don’t qualify for the combat zone extension, may qualify for a two-month filing and payment extension.
Members of the military who served or are currently serving in a combat zone may qualify for an additional extension of at least 180 days to file and pay taxes.
Support personnel in combat zones or a contingency operation in support of the Armed Forces may also qualify for a filing and payment extension of at least 180 days.
The military community can also file their taxes using MilTax, a free tax resource offered through the Department of Defense. Eligible taxpayers can use MilTax to file a federal tax return electronically and up to three state returns for free.
If You Don’t File, You May Miss Out on a Refund
Every year, more than 1 million taxpayers choose not to file a return and miss out on receiving a refund due to potential refundable tax credits. The most common examples of these refundable credits are the Earned Income Tax Credit and Child Tax Credit. For example, the IRS estimates nearly 1.5 million people did not file a tax return for 2019 and missed out on an estimated average median refund of $893 (i.e., half of the refunds are more than $893, and half are less).
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, the three-year window for 2019 unfiled returns was postponed to July 17, 2023, due to the COVID-19 pandemic emergency.
How To Make a Payment
If you owe money but cannot pay the IRS in full, pay as much as possible when you file your tax return to minimize penalties and interest. The IRS will work with taxpayers suffering financial hardship. Taxpayers with a history of filing and paying on time often qualify for administrative penalty relief. A taxpayer usually qualifies if they have filed and paid promptly for the past three years and meet other requirements. However, if you continue to ignore your tax bill, the IRS may take collection action.
There are several ways to make a payment on your taxes: credit card, electronic funds transfer, check, money order, cashier’s check, or cash. If you pay your federal taxes using a major credit card or debit card, there is no IRS fee for credit or debit card payments, but processing companies may charge a convenience or flat fee. It is important to review all your options. The interest rates on a loan or credit card could be lower than the combination of penalties and interest imposed by the Internal Revenue Code.
What To Do if You Can’t Pay in Full
Taxpayers who cannot pay the full amount owed on a tax bill are encouraged to pay as much as possible. By paying as much as possible now, the interest and penalties owed will be less than if you pay nothing. Based on individual circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, a temporary delay, or an offer in compromise. Don’t hesitate to call if you have questions about these options.
Direct Pay. For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. Taxpayers who need more time to pay can set up either a short-term payment extension or a monthly payment plan.
Payment Plans. Most people can set up a monthly payment plan or installment agreement that gives taxpayers more time to pay. However, penalties and interest will continue to be charged on the unpaid portion of the debt throughout the duration of the installment agreement/payment plan. You should pay as much as possible before entering into an installment agreement.
Cash Payments. Individual taxpayers who do not have a bank account or credit card and need to pay their tax bill using cash can make a cash payment at participating PayNearMe Company payment locations (places like 7-Eleven). Individuals wishing to take advantage of this payment option should visit the IRS.gov payments page, select the cash option in the “Other Ways You Can Pay” section, and follow the instructions.
What Happens if You Don’t File a Past Due Return
It’s important to understand the ramifications of not filing a past-due return and the steps that the IRS will take. Taxpayers who continue not to file a required return and fail to respond to IRS requests for a return may be considered for various enforcement actions, including substantial penalties and fees.
Need Help Filing Your 2022 Tax Return?
If you haven’t filed a tax return yet, don’t delay. Call the office today to schedule an appointment as soon as possible.
Tax credits can reduce your tax bill or give you a bigger refund, but not all tax credits are created equal. While most tax credits are refundable, some credits are nonrefundable. Still, before we look at the difference between refundable and nonrefundable tax credits, it’s important to understand the difference between a tax credit and a tax deduction.
Understanding the Difference between a Tax Credit and a Tax Deduction
Tax credits reduce your tax liability dollar for dollar and are more valuable than tax deductions that reduce your taxable income and are tied to your marginal tax bracket. Let’s look at the difference between a tax credit of $1,000 and a tax deduction of $1,000 for a taxpayer whose income places them in the 22% tax bracket:
A tax credit worth $1,000 reduces the amount of tax owed by $1,000 – the same dollar amount.
A tax deduction worth the same amount ($1,000) only saves you $330, however (0.22 x $1,000 = $220). As you can see, tax credits save you more money than tax deductions.
Tax Credits: Refundable vs. Nonrefundable
A refundable tax credit reduces the federal tax you owe and could result in a refund if it is more than you owe. Let’s say you are eligible for the Child Tax Credit for $1,000 but only owe $200 in taxes. The additional amount ($800) is treated as a refund.
A nonrefundable tax credit means you get a refund only up to the amount you owe. For example, if you are eligible to take an American Opportunity Tax Credit worth $1,000 and the amount of tax owed is only $800, you can only reduce your taxable amount by $800 – not the full $1,000.
Examples of Refundable Tax Credits
The Earned Income Tax Credit
Additional Child Tax Credit
Premium Tax Credit
Nonrefundable Tax Credits
Examples of nonrefundable tax credits include:
Adoption Tax Credit
Electric Vehicle Tax Credit
Foreign Tax Credit
Mortgage Interest Tax Credit
Residential Energy Property Credit
Credit for the Elderly or the Disabled
Credit for Other Dependents
The Saver’s Credit
Partially Refundable Tax Credits
Some tax credits are only partially refundable such as:
Child Tax Credit (fully refundable in 2021 and 2022)
American Opportunity Tax Credit
Questions About Tax Credits or Deductions?
If you have any questions or want more information about these tax topics, please call.
Final corrections for taxpayers who overpaid their taxes on unemployment compensation received in 2020 have been completed by the IRS. Approximately 14 million returns were corrected, resulting in nearly 12 million refunds totaling $14.8 billion.
Background
The American Rescue Plan Act of 2021, which became law in March 2021, allowed taxpayers to exclude up to $10,200 in 2020 unemployment compensation from taxable income calculations (up to $10,200 for each spouse if married filing jointly). The exclusion applied to individuals and married couples whose modified adjusted gross income was less than $150,000.
To ease the burden on taxpayers, the IRS reviewed Forms 1040 and 1040-SR that were filed prior to the law’s enactment to identify taxpayers who had already reported unemployment compensation as income and were eligible for the correction. The IRS determined the correct taxable amount of unemployment compensation and tax.
Overpayments Refunded or Applied to Tax Due
With an average refund of $1,232, some taxpayers received refunds, while others had the overpayment applied to taxes due or other debts. In some cases, the exclusion only resulted in a reduction in their adjusted gross income. Letters were mailed to these taxpayers to inform them of the corrections. Taxpayers should keep that letter with their tax records.
Many of the adjustments included corrections to the:
Earned Income Tax Credit
Recovery Rebate Credit
Additional Child Tax Credit
American Opportunity Tax Credit
Premium Tax Credit
Advance Premium Tax Credit
Of note is that a taxpayer who is eligible for the unemployment compensation exclusion but whose account was not corrected by the IRS may need to file an amended 2020 tax return. Taxpayers who filed 2020 Forms 1040 and 1040-SR can file Form 1040-X, Amended U.S. Individual Income Tax Return, to claim the exclusion and any applicable non-refundable or refundable credits impacted by the exclusion. Taxpayers should not file an amended return if they previously filed one claiming the exclusion.
Taxpayers that need to file an amended tax return can view their 2020 tax records in their Online Account or request that a 2020 tax account transcript be mailed to them. Please call the office for more information about this topic, including eligibility requirements.
