tax refund

How long does it take to get your tax refund?

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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Your annual income tax return may seem quite complex to fill out, but its structure is actually quite simple. On this document you calculate all of your earnings and subtract eligible deductions and credits.

The remaining amount is your taxable income, and you multiply this by the applicable tax rate to determine how much income tax you owe to the government.

However, in most cases, you prepay your income tax through deductions from your regular paycheck. If the amount you paid through these deductions during the year is greater than the amount you owe, you receive a tax refund.

After you file your taxes, you wait for the IRS to review your return and issue a refund. The IRS claims that it approves most tax refunds within 21 days but it can take longer.

Understanding this process can help you move the process along to get your refund.

How the IRS evaluates the return

Once your tax return reaches the IRS, an auditor confirms or questions the information you have provided, starting with the first section of the return. The auditor inspects the amount of money you claimed as income, which should accurately show every source of income you had over the course of the tax year.

If you are employed, you should have a form W-2 from each employer. This document contains the total wages the employer paid you during the preceding year.

If you are an independent contractor, you should have a W-9, which contains the same information. Copy all relevant earning and taxation information from these slips accurately on to your income tax return.

If you make a mistake entering information, the IRS must spend more time looking for the correction figures. Double-check your amounts before sending in your tax return to avoid this problem which extends the length of time you wait for your refund.

Tax deductions and credits

The more tax deductions and credits you claim on your annual tax return, the longer you wait for your refund. This is because the IRS must spend more time verifying the deductions and credits. This does not mean you should refrain from claiming legitimate tax deductions. Instead, just make sure to include clear documentation for each deduction.

For example, if you made a donation to a registered charity, you can deduct the dollar amount of the donation and lower your total taxable income. To make sure that the IRS agent auditing your tax return can confirm this deduction expeditiously, include the receipt. Do so with every deduction, reduce the wait time for your refund.

Conclusion

The IRS claims that it approves most tax refunds within 21 days of receipt of the return. However, the IRS does not issue refunds for anyone claiming earned income credit until after Feb. 15 so it has time to match the income you claim on the return with the amount reported by your employer.

If you request an electronic deposit, you receive your refund within one business week after your approval. Checks take up to four weeks to arrive in the mail.

Waiting for your refund may feel like a long time, but if you double-check your math and properly document each deduction and credit, you improve your odds of receiving your refund within the average 21 day period.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Some tax refunds in 2017 to be delayed

By Bankrate

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

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If you file your federal tax return early every year to get an expected refund quickly, you could be disappointed in 2017.

A provision in the Protecting Americans from Tax Hikes Act of 2015, or PATH Act, that became law last December will push refunds until mid-February next filing season for folks who claim the earned income or additional child tax credits.

Fighting tax credit fraud

Both the earned income tax credit, or EITC, and additional child tax credit are refundable.

This means that the credits will reduce any tax you might owe and when the credit amount is greater than your tax bill, you will get the excess as a refund.

However, many lawmakers have argued that these tax credits are frequently abused, with the IRS issuing billions in fraudulent refunds on improper EITC and additional child tax credit claims. To reduce the fraud, numerous bills have been introduced in Congress in recent years to make it more difficult to claim these credits.

Supporters of the 2 credits, which are designed to help lower-income taxpayers, acknowledge that there is some tax fraud related to the tax breaks. However, they contend that many of the improperly paid refunds are related to the credits’ complexity. People who depend on the added tax credit money need help in properly applying for the tax breaks, not added obstacles.

A compromise on the refundable credits was reached late last year in the PATH Act.

The new mandated refund issuance delay should give the IRS additional time to review and confirm that the claims are legitimate and accurate. The IRS and PATH provision supporters say the delay will help prevent, or at least reduce, the amount of money the U.S. Treasury loses each year to fraudulent credit claims based on fabricated wages and withholding.

Still available, just later

The annual tax-filing season typically begins around the third week of January. The IRS says that even with increased security procedures to fight tax identity theft and refund fraud, it usually will get refunds to taxpayers in 21 days or less.

Filing electronically and having your refund directly deposited will speed up that turnaround, says the IRS.

If you e-file, for example, on Jan. 17, 2017, then you could expect your refund to show up in your bank account by Feb. 7.

However, if next year you claim the EITC or the additional child tax credit on your Form 1040, then you’ll have to wait another 8 days for your refund.

Get your tax money now

So plan accordingly.

And maybe think about adjusting your payroll tax withholding now.

That way, you’ll get your expected tax refund amount incrementally for the next 6 months instead of letting the Bank of Uncle Sam hold your cash, interest-free, until mid-February 2017.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Slow state tax refunds upset filers

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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The Minnesota Department of Revenue warned its taxpayers back in January that new and increased measures to fight tax identity theft and refund fraud could slow their refunds.

They weren’t kidding. Two months later, folks in the Land of 10,000 Lakes are getting annoyed.

Anger growing over slow refunds

Personally, I’ve heard from some Minnesota taxpayers who are not happy with the wait. More have been heading to the Minnesota Department of Revenue Facebook page to register their complaints.

The consensus is that it’s unfair for state tax officials to hold on to the refunds when they certainly don’t allow such delays for taxpayers who owe taxes.

It sounds like there weren’t many Minnesotans in the recent Bankrate tax poll that found more than 70% of U.S. taxpayers would give the IRS more time to process returns in order to fight tax fraud.

Seriously, though, I understand the frustration, especially if you’re counting on the tax money to cover some necessary expenses. That’s what 27% of those surveyed by Bankrate said they would do with their federal refund money.

Lost state revenue to tax fraud

But I also get where Minnesota tax officials are coming from. Like Uncle Sam, states lose a lot of money every year to tax fraud.

Eventually, we all pay for that stolen tax money.

That’s why the Vermont Department of Taxes is just now getting around to distributing more than $16 million in refund claims.

The Green Mountain State held the money in February as it waited for more employer W-2 forms and other information against which the returns, and their delayed refunds, could be checked for legitimacy.

More state security checks

While Minnesota’s taxpayers are more vocal about their delayed refunds, they are not alone.

Every state that collects some form of individual income tax — that’s 43 of them, along with the District of Columbia — is experiencing refund delays due to high levels of refund fraud this tax season.

States aren’t revealing what they’re doing to catch fraudulent refunds. “If you design a new key, you don’t want to put the blueprints out there,” Verenda Smith of the Federation of Tax Administrators told Tax Notes.

A check of state tax websites, however, reveals that in order to accept or process returns, many departments are asking their filers for state-issued driver’s license info or enhanced password requirements and security questions in connection with state-authorized tax preparation software. Some are even demanding that taxpayers whose returns raise questions complete a quiz to confirm their identity.

Security paying off

Anecdotally, the efforts to cut down on stolen identity refund fraud seem to be working.

Illinois, which finally began issuing its refunds on March 1, says fraud-prevention measures implemented last year saved nearly $5 million from going to tax criminals.

Even less populated states are seeing results from their tax fraud prevention efforts.

Montana tax officials say that so far this year, they have blocked 188 fraudulent returns seeking a total of $220,245 in refunds. Last year at this point in the filing season, Montana had blocked 529 fraudulent returns seeking nearly $583,000 in refunds.

But the states are paying a price in lost goodwill.

Taxpayers express frustration over tax departments never acknowledging receipt of their state tax returns, reports Tax Notes, or getting a busy signal when phoning state tax offices.

Have you gotten your state tax refund yet? If not, has your state explained why it’s delayed? Are you in tough financial straits because of the unexpected wait?

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.