Tax refunds: Who doesn’t want one?
They’ve been in the news quite a bit lately, for reasons both good and not-so-good.
“It’s a pretty messed-up season,” said John Hogg, owner of 10 Jackson Hewitt Tax Services offices in the Sacramento, Calif., area. “The amount of refunds is far behind last year,” he said.
While the Internal Revenue Service isn’t putting out numbers on how many refunds have been issued so far this tax season, refunds got off to a bit of a bumpy start this year.
Blame it on an unlucky confluence of events: a late launch to the filing season, which started eight days later than usual thanks to last-minute, “fiscal cliff” tax changes enacted by Congress; the inability of taxpayers to file for some credits until early March; and more diligent scrutiny of tax returns, part of the IRS’ beefed-up efforts to thwart identity theft and tax refund fraud.
Even Wal-Mart said it has felt the impact of later-than-usual refunds. By this time last year, the giant retailer had cashed about $3 billion worth of checks related to tax refunds. This year, that amount is just $1.7 billion, the company said last week.
Some tax professionals like Hogg said they’re seeing lots of disappointed tax filers — who either can’t file yet or whose refunds are taking longer to arrive. Others, like Michael Hayes, H&R Block regional marketing manager for 50 tax prep offices from Sacramento to Tahoe, said, “In the last few days, it’s gotten better. (Tax refunds) are starting to process a little faster.”
In 2012, the IRS said, nine out of 10 refunds were issued in less than 21 days. “The same results are expected in 2013,” IRS spokesman Richard Panick said in an email.
At Jackson Hewitt, Hogg said refunds have especially been slower for many lower-income taxpayers who qualify for the Earned Income Tax Credit. For single head of household filers with two young children, that refundable credit could mean $7,039 in their pocket.
“It’s the most significant financial event for them for the year. And now it’s all up in the air,” Hogg said. “They don’t know when they’ll get their refund.”
In recent weeks, so many taxpayers were using the IRS online tool, “Where’s My Refund,” the IRS actually had to issue a plea: Don’t check it more than once a day.
Once you’ve filed a federal tax return, the popular tool on IRS.gov lets you track your refund’s progress: when the return was received, when a refund was approved and sent out.
But in mid-February, so many people were clicking “Where’s My Refund?” that the system jammed up. The online tool is updated only every 24 hours, the IRS noted, so repeated attempts to check online or from a smartphone won’t yield any new information.
“A taxpayer’s account isn’t likely to change that often, so there’s no need to check more than once a day,” said Panick. And nights or weekends, when the IRS site’s traffic slows down, are the best times to check your refund’s status, he added.
With an e-filed return, you can check within the first 24 hours after it’s filed. With a paper return, check four weeks after you mailed it.
One of the best ways to avoid refund delays: submit an “error-free” tax return. And that doesn’t necessarily mean math mistakes. To avoid processing delays, the IRS reminds taxpayers to:
• Verify the Social Security numbers for yourself, spouse and dependents.
• Be sure your mailing address is correct. (Every year, thousands of refunds get returned as “undeliverable” by the U.S. Post Office because taxpayers either moved or provided an incorrect address.)
• Double-check your bank routing numbers if requesting direct deposit.
The quickest way to collect your tax refund is by requesting “direct deposit” when filing. It goes straight into your checking or savings account.
Or by using IRS Form 8888, you can divvy up your refund among as many as three different accounts.
Let’s say you’re getting back $1,500: You can designate $300 to your checking, $500 to a savings account and $700 to your credit union.
The IRS said most taxpayers should have received their W-2 and 1099 forms by mid-February. If you’re still waiting, contact your employer or issuer; or call the IRS at 800-829-1040 if you can’t get a replacement.
The IRS is predicting that the number of tax returns filed this year will go up about 1.6 percent. In 2012, the average tax refund was $2,803.
There’s good news for those who miss the old-fashioned paper U.S. savings bonds. There’s actually one way left to buy a real, honest-to-goodness paper bond: With your tax refund.
Under a program started in 2010, taxpayers can use their federal tax refund to buy up to $5,000 in paper Series I savings bonds.
Last year, in a multimillion-dollar cost-saving measure, the U.S. Treasury announced it would no longer issue savings bonds in paper form.
That set off a howl, especially among grandparents and others who have been buying savings bonds for decades as holiday, baby and graduation gifts. Today, savings bonds can be purchased only online, through http://www.TreasuryDirect.gov.
Except at tax time.
Using Form 8888, taxpayers can buy up to $5,000 in Series I savings bonds, in $50 increments. You can buy them for up to three people. And you’ll receive them by mail. (If you don’t spend all of your refund on savings bonds, the remainder will be issued by check or direct deposit.)
Last year, 36,000 taxpayers did just that, buying about 184,000 paper bonds, worth a little more than $21 million, according to the U.S. Treasury.
“We want to make sure we have options for people who don’t have a bank account,” said Treasury spokesman Jerry Kelly in Washington, D.C.
He said participation in the refund-for-paper-bond program is growing steadily.
“Last year we saw an increase because people want to give these bonds as gifts. We expect to see them continue to grow.”