Tax Day is over for most of us but some taxpayers are still looking for their refunds.
Statistically, the IRS has processed refund requests at a faster pace than last year (101,176,000 refunds issued as of last week’s report compared to 101,082,000 for the same time period in 2013). Even so, taxpayers who haven’t yet received their refunds have expressed frustration at the wait with some reporting to me that returns which were filed as early as February have still not resulted in cash in hand.
So what gives? There are a number of reasons why refunds might be delayed.
One common reason is human error: transposition of numbers, old addresses, and bad account information. The easiest way to prevent those errors is to be sure to double-check your return before you file it in order to speed processing.
If you’ve moved, you need to file a federal form 8822, Change of Address with IRS: allow plenty of time for processing.
If you changed your name because of marriage or divorce, you can notify IRS using the same form (8822). It’s important to also notify the Social Security Administration of the change so that your name matches on both records: if your name is different on your tax return than on your Social Security Administration records, it could delay the processing of your return. Additionally, if you originally filed a joint tax return and you and/or your spouse have since established separate residences for any reason, you both should notify the IRS of your new addresses.
It’s also important to make sure that your direct deposit information is correct. The account information on your tax form should match your personal information: it should not be directed to a third party, including your tax preparer. It’s important to note that some banks won’t allow you to direct deposit joint tax refunds into individual accounts or into check or share draft accounts that are “payable through” another institution. Finally, your account should be an actual checking, savings, or similar account at a qualifying financial institution: refunds cannot be applied to credit cards or deposited into accounts at non-qualifying financial institutions.
If your refund is refused at the bank because of bank policy or because the account or routing number is bad, the result can be a delay of up to ten weeks after the refusal. The IRS will then attempt to deliver your refund by mail in the form of a paper check.
Your refund might also be delayed or reduced due to offset. Offset occurs when you owe money for a federal or state obligation. Common examples include student loans or outstanding child support obligations. You should receive notice if your refund is subject to offset but there have been complaints that notice has not been provided – especially for very old debts. And be careful: even if you aren’t personally liable for the obligation, your refund may be affected if you file a joint return (if that’s the case, consider filing separately in the future or apply for injured spouse relief).
Sometimes the IRS pulls your return because they want to look at it again. This can happen because of questions about your dependents (especially common when more than one parent attempts to claim a child), income that doesn’t match the forms as reported to the IRS (if, for example, you forgot to include income on a form W-2 or 1099) or because of concerns about identity theft. It may also be that your earned income tax credit (EITC) has raised some questions as IRS implements more screens to weed out fraud.
If your return is pulled for review, you will most likely receive a letter from the IRS called a 4464c. If you get a letter from the IRS, don’t panic and don’t ignore it: open your mail and read it.
There are a few variations on a theme but most letters 4464c likely start out something like this:
We have received your income tax return and are holding your refund until we complete a thorough review of your return. This review is part of an ongoing program the IRS conducts to ensure the accuracy of return information.
The letter should then indicate what the IRS may be concerned about. So the letter might say something like:
Your return was selected because we are reviewing one or more of the following:
– Income you reported on your return
– Income tax withholding amounts you reported on your return
– Claims for tax credits you made on your return
– Business income you reported on your return
You’ll then be instructed on what immediate steps to take, if any. It may well be that the letter simply says:
You are not required to do anything at this time. If you have not received your refund or been contacted by us within 60 days from the date of this letter, you may call us at the number provided above.
Hold onto that letter because you’re going to want to call the number on the letter within the stated time frame if your refund is still outstanding. You should not just rely on the “Where’s My Refund?” tool.
This is not the same as a proper examination or audit, it’s a review. If it escalates to an examination, you’ll be contacted by IRS to say what’s next – that usually involves providing additional documentation. It may be that you need to call in a tax professional to assist you at that point.
If you have not received a refund or any information about the delay (including a letter 4464c), you may want to try calling the IRS directly at 1.800.829.1040. Be sure to have information about your tax return handy and check the date that your return was filed: you should not call before 21 days have passed since you filed the return.
If you are experiencing significant financial harm as a result of the delay, you might consider contacting the Taxpayer Advocate Service (TAS). You can reach TAS by calling the TAS toll free number at 1-877-777-4778 or TTY/TDD 1-800-829-4059. If you want in-person service, you can locate a TAS office near you by searching the TAS list. TAS also offers videoconferencing in select cities (Kenai, AK; San Diego, CA; Tampa, FL; Davenport, IA; Billings, MT; Reno, NV; Spokane, WA); those locations use high-definition two-way video conferencing which allows you to discuss your tax matters in a private setting.
If you’ve tried all of those things and you’re still out of pocket, I agree that it stinks. But here’s what won’t help:
- Checking your transcript several times a day (those codes like 570 don’t always mean the same to you as they do to IRS)
- Checking “Where’s My Refund?” more than once a day (it’s only updated every 24 hours)
- Googling the IRS manual to figure out what the code 1121 on your transcript means (there’s no definitive answer over the internet)
- Calling IRS and harassing or threatening the representatives
- Calling your tax preparer if he or she has already advised that there’s nothing more they can do
- Sending a tax blogger incredibly angry and vile emails (I have nothing to do with your refund, I swear!)
While statistically, it’s unlikely that something dreadful happened to your return, it happens. It might have gotten lost in the mail. Your preparer could have said they sent it and didn’t (that has happened to more than one of my clients). Your identity could have been stolen and a fake refund issued to someone else using your Social Security number (that’s also happened to a number of my clients).
And while it’s not out of the realm of possibility that the IRS screwed up your return – mistakes absolutely do happen – there are many other potential explanations for the delay in getting your refund. And no one, not IRS, not TAS, not your tax preparer, and certainly not me, is happy to hear about the difficulties that honest taxpayers are encountering. But be patient. Double-check the information on your return in case you need to make any corrections. Open your mail if you receive something from IRS. Follow the directions and don’t ignore pleas for more information. And lastly, don’t be afraid to reach out to IRS and TAS for help.