If you pay an excessive amount of taxes to the government, they send back the extra amount as a ‘Tax Refund.’ When it happens, taxpayers see it as a bonus from the federal or state government. Moreover, not many are aware of how long does it take the IRS to approve your refund.
Sometimes these occur due to errors in the W-4 form filed by the taxpayers. But it is a rebate when people get these amounts back, especially if they are having a rocky financial time.
What is the refundable tax credit?
Much of the tax credits are not refundable. There are some exceptions which the IRS considers for refunding:
- You have made an error while filling the form for the IRS Form W-4. This form holds the information on how much income is to be withheld from one’s salary for payroll and Social Security.
- You have forgotten to revamp the form in case of any changes in your situation. For example, Childbirth will entitle you to a Child Tax Credit and its rebates.
- Filling a higher amount for tax refund during the time of taxes in the W-4 Form.
- Many times, when you are eligible for a tax credit refund, it reduces the amount of tax you owe. And the extra money gets returned to you in form of cash.
- A self-employed person who has been filing taxes quarterly often chooses to overpay to avoid any surprise tax popping up.
- Also, if you get a tax refund even though none of the above reasons apply to you, it means that you overpaid last year’s taxes.
- Not every person concurs. A few groups consider tax refunds as an elective investment plan and anticipate tax refunds for their savings accounts.
Tax Credits that can be refunded to you
- AOTC, or the American opportunity tax credit, is partially refundable. These get provided to those who are looking to pursue higher education. And are seeking financial help. Before you use up your $2,500 and your tax liability is $0, then you are entitled to a 40% refund of the credit or about $1,000.
- EITC or the earned income tax credit is also refundable. This is for those who make moderate to low incomes. The other criteria are that they have a family to support. In the EITC, having 3 or more children can get them a tax rebate of $6,660 in 2020. In 2021, the amount got changed to $6,728.
- The child tax credit is refundable to $1,400. The credit is $2,000. In 2021, credit got raised by $3,000 for those with children between ages 6 to 17. For children under 6, they get a refund of $3,600. There is no set income limit for the child tax credit.
How long will it take the IRS to approve a refund?
First off, it depends on how you sent your refund request. There are 4 options:
- Direct Deposit and E-file: You can expect your refund between 1 to 3 weeks.
- Check method and E-File: It can take about a month for this request to get processed.
- Check & Mail in return: This one takes a long while to process your refund. It can take up to 2 months for the IRS to send back your tax credit.
- Direct Deposit and Mail in return: This can take over 3 weeks to be processed and refunded to you.
Then the request gets stamped with an electronic postmark. Then it is forwarded to the government. IRS accepts these requests in the next 24 to 48 hours for processing. IRS then checks up all the information and ensures that the data matches. If your form is acceptable, then your request for a refund is moved forward.
They put you on their payment timetable. At this point, only IRS is aware of where your tax returns are. In most cases, the IRS processes and mails the tax refund request in a maximum of 21 days. Any longer than that can be enquired from the IRS Helpdesk.
For further information, you can call the IRS at 800-829-1954. Also, you can use IRS’ ‘Where’s my refund’ tool to tracking the status of it. The fast way to get your refund is to go for the E-filing and direct deposit option.
In what cases can my tax refund form be rejected?
Tax refunds can be given in the form of personal checks, U.S. investment funds securities, or direct deposits to the citizen’s account. These taxes are refunded within weeks after you file for a return. In some cases, the return for the request can take a while.
However, your request can be rejected due to the following reasons:
- Your form has errors that are why it got rejected.
- You did not complete the form.
- You were a victim of identity theft and fraud due to which your request for a refund was denied.
- Put under review by the IRS as the data was not matching the previous records.
- Another reason behind this is, filing for EITC (Earned Income Tax Credit) or Additional Child Tax.
- Injured spouse allocation forms can take up to 14 weeks to process.
Tax refunds are welcomed by many as they come as an additional bonus that you are not expecting. But, it is recommended to avoid overpaying the taxes. It can look shady sometimes. And putting additional money into taxes that you are expecting a year later can be invested now.
This money also will have the potential to multiply in your account if you utilize bank schemes and policies. In conclusion, pay your taxes accordingly. If you have trouble calculating them, you can check out Online Tax Calculators to help you with the case.
These will aid you in calculating your quarterly debt owed to the federal and state agencies. You can simply find the number and estimate it for your next payment. Be consistent about your taxes and document, so that in the case of auditing, you have a solid alibi.