25 Apr 6 IRS Tax Refund Myths
As the Internal Revenue Service (IRS) processes millions of tax returns, the millions of taxpayers also eagerly await their tax refund. Since it’s tax season, tax is the hottest topic around. Unfortunately, just like any popular conversations, not everything you hear will be the truth. So here are some tax refund myths that you are bound to hear.
Everybody gets a tax refund
It’s funny that whenever people scramble to file their tax return in order to get a tax refund, other people scramble as well, even if they didn’t actually deserve a tax refund. Many people actually expect a tax refund. The tax refund is basically just a tax rebate when taxpayers pay more than their liability. It is not a benefit from the IRS. It is basically just your own money, some kind of over payment to the government. People obviously want it because it’s kind of a windfall since it is usually a large sum of money. In fact, when you look at it logically, having a refund should not sound as attractive as it usually does because this is money that had gotten stagnant in the hands of the IRS. If you had this kind of money and invested it, then perhaps you would have more in your hands. Instead, the money was with the government and given back to you after a year or so without any interest. But if there is a delay in your tax payment, rest assured that you will be penalized by the IRS and you will also be liable to pay interest.
So what could be the reason you are not getting a tax refund? First of all, you have to file a tax return in order to get a tax refund. If you filed for an extension to file tax return, then that means the IRS cannot process your actual tax due just yet. As a result, your refund may be delayed—so this is not an absolute negative on the tax refund front. You are also not liable for a tax refund if the amount withheld from your paycheck is just right. Again, note that not getting a tax refund is not exactly a bad thing. In other cases, you might have earned a substantial amount from the Individual Retirement Account (IRA), which has offset your tax refund. The IRA has an investment component, which is why a taxpayer could earn from it. You know that the IRS will tax every earning you have and that IRA extra income will not get immunity.
Calling the IRS / tax professional will hasten the release of tax refund
If you think calling the IRS will make your tax refund come any faster, then you’re in for a heartbreak. This is such a load of myth because calling the IRS would only mean being placed on hold for a very long time. The IRS has so many things to do and probably many other taxpayers to entertain on the phone, some probably having the same thoughts as you. The same for the tax professionals, calling them will not make your refund arrive any faster.
There is a tool, though, where you don’t actually have to irritate any person to know how long before you can have your refund. Keeping up with the times, the IRS has its own app: IRS2Go. There is where you can check your refund status and make payments as well. You only need your Social Security number, filing status and amount of expected refund. If the tax return was filed electronically, then the status of your refund will be available within 24 hours. If you filed via regular mail, the status will not be available until after at least a month.
There is also a tool on IRS.gov called Where’s My Refund? You can just click the tool and input your personal data in order to check your status.
Where’s My Refund? Tool doesn’t work—it doesn’t show a deposit date for the refund
Just because it doesn’t give you what you want doesn’t mean it’s not working. Most people question how Where’s My Refund? works because of varied experiences with other people. Say you checked Where’s My Refund? on the same day a friend of yours or colleague did, it doesn’t mean that your tax refund will be released or arrive at your doorstep on the same day your friend or colleague received theirs. The IRS doesn’t process every tax return the same way. This makes sense since one tax return varies from the other.
Where’s My Refund? tool is wrong!
This usually happens when one receives a tax refund that’s smaller than expected. Computation is not always perfect, so the difference in the expected tax refund and the amount actually received could simply be attributed to math mistakes. The discrepancy may also be caused by delinquent federal taxes. Sometimes, the IRS withholds a certain amount unless it has completed a review on an item claimed on the tax return.
Don’t worry though, the IRS will be sending a letter of explanation on why the actual refund is different from what was expected.
Acquiring a tax transcript will give you a tax refund date
So some internet influencers call this a tax refund hack of sorts: ask for a tax transcript from the IRS and, in turn, you will get the date of when to expect a tax refund. This is not true at all. A tax transcript will only indicate past income, tax filing status for mortgage, student loan application and small business loan application. Nowhere in the transcript does it indicate when you will be getting a tax refund. Many have called this a “secret way” but it is never the case.
I got a refund! There is no need to review withholding tax
Withholding tax should be checked every year and should be adjusted annually as well if necessary. Just because you got a refund doesn’t mean that your withholding should remain the same. It is always better to be safe than sorry, so make sure you will be deducted the right amount of tax this year.
Taxes are boring stuff and people don’t always take time to get to know them. But there is power in knowledge. The more you know about taxes, the more you are empowered. This truly helps when dealing with the IRS and taxes in general. The first part of learning about taxes is separating the truth from the myth.