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The IRS continues to make progress on its inventory of tax returns, payments, refunds, and correspondence. However, some sectors are still experiencing delays. Here’s where things stand.
The IRS says it has processed all paper and electronic individual returns received before April 2023, and they are opening mail within normal time frames. This means they have processed all returns for the tax year 2021 or earlier if those returns had no errors or did not require further review.
As of July 8, 2023, the agency had 2.42 million unprocessed individual returns. Those include tax year 2022 returns, 2021 returns that need review or correction, and late filed prior year returns. Of these, 1.6 million returns require error correction or special handling, and 820,000 are paper returns waiting to be reviewed and processed.
This work does not typically require taxpayer correspondence, but it does require special handling by an IRS employee, so in these instances, it takes the IRS more than 21 days to issue any related refund…Continue reading….
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Source: Tax Refund And Return Processing Times Shorten As IRS Works Through Backlog
Critics:
According to the Internal Revenue Service, 77% of tax returns filed in 2004 resulted in a refund check, with the average refund check being $2,100. In 2011, the average tax refund was $2,913. For the 2017 tax year the average refund was $2,035 and for 2018 it was 8% less at $1,865, reflecting the changes brought by the most sweeping changes to the tax code in 30 years.
The latest data from the Internal Revenue Service (IRS) agency shows that the total amount refunded to taxpayers by IRS through 2023 will be approximately $198.9 billion, which is $23.5 billion less than in 2022. That equates to an average refund of $2,878 — or $297 less per person than last tax season. Taxpayers may choose to have their refund directly deposited into their bank account, have a check mailed to them, or have their refund applied to the following year’s income tax.
As of 2006, tax filers may split their tax refund with direct deposit in up to three separate accounts with three different financial institutions. This has given taxpayers an opportunity to save and spend some of their refund (rather than only spend their refund). Every year, a number of U.S. taxpayers around the country get tax refunds even if they owe zero income tax. This is due to withholding calculations and the earned income tax credit.
Because withholding is calculated on an annualized basis, an individual just entering the work force or unemployed for a long period of time will have more tax than is owed withheld. Refund anticipation loans are a common means to receive a tax refund early, but at the expense of high fees that can reach over 200% annual interest. In the 1990s, refunds could take as long as twelve weeks to come back to the taxpayer; the average time for a refund is six weeks, with refunds from electronically filed returns coming in three weeks.
Some people believe that getting a large tax refund is not as desirable as more accurate withholding throughout the year, as a large refund represents a loan paid back by the government interest-free. Optimally, a return should result in a payment owed of just less than the amount that would cause a penalty charge, which is 100% of the prior year’s tax (110% for high income individuals), 90% of the current year’s tax, or $1,000 for individuals who have direct withholding and do not pay estimated tax.
In order to decrease the amount of the tax refund which has to be received by taxpayers, they can turn to one or several of the following methods:
Adjust the amount of tax the federal government withholds from the paycheck. It is recommended for taxpayers to do this in cases where their adjustments to income, exemptions, and deductions remain relatively steady from year-to-year, and if the government consistently is required to give a large refund.
In the case of people entirely exempt from state tax, they can check with their state income tax authority to see if there is an appropriate form that can be completed and filed, which would exempt them from state withholding
Check tax rates and adjusted gross income thresholds (applicable if taxpayers are hovering near the bottom of certain tax brackets and changes have been made to the thresholds and/or tax rates)
Take advantage of the medical expense deduction (applicable for medical expenses now imposed for tax years starting in 2013)
Maximizing the amount allowed to save tax-free for retirement.
However, some people use the tax refund as a simple “savings plan” to get money back each year (even though it is excess money that they paid earlier in the year). Another argument is that it is better to get a refund rather than to owe money, because in the latter case one might find oneself without sufficient funds to make the necessary payment.
When properly filled out, the Form W-4 will withhold approximately the correct amount of tax to eliminate a refund or amount owed, assuming the W-4 was filled out at the beginning of the tax year. A U.S. federal law signed in 1996 contained a provision that required the federal government to make electronic payments by 1999. In 2008, the U.S. Treasury Department paired with Comerica Bank to offer the Direct Express Debit MasterCard prepaid debit card.
The card is used to make payments to federal benefit recipients who do not have a bank account. Tax refunds are exempt from the electronic payments requirement. Many U.S. states send tax refunds in the form of prepaid debit cards to people who do not have bank accounts.
Related contents:
- FDIC: FDIC Consumer News Winter 2004/2005 Archived
- Average tax refund slips to $2,913 in 2011″. CNN Money. Average tax refund down 8% so far this season”.
- Americans Getting $20 Billion Less in Tax Refunds”.
- “Where’s My Refund? – It’s Quick, Easy and Secure”.
- “Notice 797 Possible Federal Tax Refund Due to the Earned Income Credit (EIC)”
- Tax Refund Anticipation Loans”.
- “2022 Average IRS and State Tax Refund and Processing Times | $aving to Invest”.
- Tax Topics – Topic 152 Refund Information”.
- Using your 2012 tax-year return to plan for the future
- “IRS Withholding Calculator”.
- “Federal government chooses direct deposit and prepaid cards over mailing checks”
- Tax overpayments and underpayments”.
- “Tax refunds – Citizens Advice”.
- The Construction Industry Scheme”.
- Tax Refunds – Am I Due A Tax Refund?”.
- Do you have to pay tax by instalments?”.
- Paying your income tax by instalments”.
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