Everyone loves getting a tax refund, right? Not us! We’ll explain why; but first let’s cover some basics about filing deadlines and refund timing.
Preparing, Filing and Acceptance of Returns
There are several steps your tax professional goes through with your return. Here is a very rough, general rundown:
- Client (you) signs engagement letter (legal agreement documenting the services to be performed) and authorization to efile electronically. This starts the relationship.
- Tax professional collects documents from the client after providing them with a list or what we call internally an “organizer.”
- Tax professional prepares the return from the data received. This is the step where the tax professional uses their skills to look for discrepancies and opportunities. There may also be some reconciliation, ticking, and tying that are done to validate the numbers.
- Tax professional asks any questions that arise from the preparation step. Client also has a chance to ask questions once a draft copy of the return is presented to them.
- Tax professional finalizes the return and prepares the deliverables. Depending on what service you’ve selected, this may include a copy of the return, a cover letter, an estimate for next year, and suggested planning activities you can do to save on next year’s tax bill.
- Tax professional collects payment from the client if they haven’t done that earlier.
- Tax professional e-files the return.
- IRS usually accepts the return within 2 days of the time it’s filed.
Filing Early
Filing early has its advantages, especially if you are expecting a refund. You remember how crowded it is at the malls before Christmas, right? Your tax preparer has exactly 11 weeks from the time the first return can be filed (this year it was February 27, 2020) to the deadline (April 15, 2020) to get either everyone’s return filed or to file an extension for more time.
There’s even less time for corporations: this deadline is March 16 this year, with an option to extend.
Filing early, just like shopping early for Christmas, means less wait time all around and more peace of mind. Please consider sending your tax preparer your documents as soon as you receive them, especially if you have a fairly simple situation. They will thank you for being early!
Checking Up on When You’ll Get Your Refund
The good news is you don’t have to call the IRS to find out when you might be getting your refund. Once your tax return is filed and accepted, it takes anywhere from 1 week to 2 months to get you refund. It’s fastest if you selected direct deposit and filed electronically, and slowest if you requested a check and filed by mail.
A couple of other things can slow a refund as well. If you claimed the Earned Income Tax Credit or the Additional Child Tax Credit, your refund may be slower.
To check on your refund status, you’ll need your social security number, your filing status (as in Single, Married Filling Joint, etc.) and the exact amount of your refund. Use this link provided by the IRS to check your refund status: https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp
Why Aren’t Refunds Good News?
Refunds are good news when they are small. But we don’t feel big refunds are ever good news. When you’re owed a refund, it means you loaned the government your hard-earned money all of last year without charging them interest. The money that’s tied up in your tax refund could have been working for you all this time, through investments in stock, real estate, retirement accounts, business deals, or at the simplest, a savings account.
Better tax planning should allow you to manage your payments to the IRS, whether they are withheld from your paycheck or you make quarterly estimated payments. Refunds only occur when you overpay.
If you don’t want to get a refund in 2021, please ask us about our tax planning services. We can make sure you don’t give out any more big loans for free.