If you happen to waited a number of months to obtain your tax refund final yr, you aren’t alone. In November of 2020, the IRS nonetheless had thousands and thousands of tax returns left to course of, that means thousands and thousands of taxpayers didn’t get their 2020 tax refunds till virtually the top of 2021.
We all know your tax refund may be one of many largest checks you obtain throughout the yr, and also you depend on getting that cash again in a well timed trend.
So, what occurred final yr? And might this case be averted with regards to getting your 2021 tax refund?
Let’s go over the fundamentals of what occurred in 2020. Whereas we’re at it, we’ll additionally provide you with some tips about be sure to obtain your tax refund as shortly as doable throughout the 2021 tax season.
Why did some 2020 tax refunds take so lengthy?
The quick reply: tax adjustments attributable to the pandemic.
The lengthy reply: It’s no secret that many companies throughout the nation are coping with employees shortages and price range cuts led to by the coronavirus pandemic. The Inside Income Service is not any exception. The financial toll of COVID-19 pressured the federal government to make many tax adjustments over the previous two years, and like the remainder of us, the IRS has been struggling to maintain up.
The American Rescue Plan signed into regulation in March 2021 was an enormous a part of why refunds took so lengthy final yr. This aid laws utilized some retroactive tax adjustments — after about half of 2020’s tax returns had already been filed. Many individuals who filed early had been out of the blue owed a refund, forcing the IRS to return and reconcile thousands and thousands of tax returns that had already been processed.
This made it harder to course of every thing else and left the IRS with a backlog of tax returns to sift via.
Which brings us to a different cause why refunds have been taking so lengthy — handbook verification of tax discrepancies associated to aid laws.
To raised perceive this, let’s take a look at a few completely different eventualities:
Situation 1:
Anne was presupposed to obtain two stimulus checks in 2020, however she solely remembered receiving the primary one. When she filed her 2020 tax return, she claimed her lacking second stimulus cost utilizing the Restoration Rebate Credit score.
In keeping with the IRS’s information, Anne ought to have acquired the total quantity of each stimulus funds in 2020. This implies she probably claimed an excessive amount of along with her Restoration Rebate Credit score. As a result of the quantity Anne claimed doesn’t match what the IRS calculated she was eligible for, the IRS must manually evaluation Anne’s return to find out which quantity is right.
If you happen to claimed a Restoration Rebate Credit score in 2020 and the quantity didn’t match what the IRS calculated you would declare, your return required a handbook evaluation.
Situation 2:
Grant misplaced his job in April 2020 and was unemployed the remainder of that yr. When submitting his 2020 tax return, he took benefit of the IRS “lookback” rule stating he may use his 2019 earned earnings to find out his Earned Earnings Tax Credit score (EITC). Grant did this as a result of his 2020 earned earnings was a lot decrease and utilizing his 2019 earned earnings would give him a bigger tax credit score.
The IRS manually reviewed 2020 returns the place taxpayers used the lookback rule to calculate their Earned Earnings Tax Credit score or Extra Youngster Tax Credit score (ACTC). Since Grant claimed the EITC utilizing his 2019 earnings, his return took longer to course of on account of handbook evaluation.
If you happen to used the lookback rule to say the EITC or ACTC in your 2020 return, your return additionally required a handbook evaluation by the IRS to make sure accuracy.
How can I get my 2021 tax refund as quickly as doable?
When you file your tax return, it’s as much as the IRS to course of your return and ship you your refund in a well timed method. Nevertheless, there are some steps you possibly can take to make sure a clean course of and improve the opportunity of receiving your refund on time.
1. File your 2021 taxes early
That is the most important step you possibly can take to make sure you obtain your tax refund on time. As soon as the IRS opens for tax season, returns are processed and reviewed within the order they’re acquired. If you would like your tax refund as early as doable, the very best factor you are able to do is file as early as doable! Simply be sure to have all the required tax paperwork you want readily available.
2. E-file your tax return
We get it, not everybody feels tax-savvy sufficient to e-file their taxes on-line. Fortunately, on-line tax software program is simply getting higher. E-filing can information you step-by-step via the tax submitting course of and even provide you with a warning to doable errors or typos you may need made.
Paper returns take longer to course of, plus they improve the prospect of human errors (corresponding to math errors), and correcting these sorts of errors solely makes the method take longer.
3. Accuracy is vital
We are saying this on a regular basis however holding your tax information organized is one of the best ways to be sure to are submitting an correct tax return. And correct tax returns are what the IRS likes to see!
In case you are claiming any tax credit for 2021, be sure to have the suitable paperwork readily available that will help you decide the right quantities to say. In 2021, for instance, the IRS is sending Letter 6419 to advance Youngster Tax Credit score recipients so that they know what remaining credit score quantity they should declare on their tax return.
In case your numbers don’t match up with the IRS’s calculations, that’s going to set off a handbook evaluation and most probably a major delay in receiving your tax refund.
Can I observe the standing of my tax refund?
The IRS gives a helpful refund tracker on their web site. In case your tax return has been accepted, you possibly can observe the standing of your refund utilizing their Where’s My Refund? software.
Sadly, in case your tax return is caught in processing, the refund tracker will solely let you know that the IRS has acquired your return. The perfect factor to do is wait to your return to be accepted by the IRS, after which use the The place’s My Refund? software to trace its standing.
Right here’s to quick refunds in 2021
We all know ready a very long time to your tax refund is extremely irritating — to not point out anxious. However by following these easy suggestions, you’re setting your self as much as get your palms in your 2021 tax refund as quickly as doable this yr.