How to claim your unclaimed refunds?

by Mounica Kota | Nov 7, 2020 | Income Tax Refund, Income Tax refunds, IRS Tax Refunds, Tax Refund

How to claim your unclaimed refunds?

To know that you have a refund due to being obtained from the IRS is one of the best things especially in these troubling pandemic times. If your refund amount is a big one, it can be utilized for different purposes such as paying off your debts, investing in an emergency fund, etc. However, you might have missed out on your refunds which were due to be obtained from the IRS. According to the IRS, $2,781 was the unclaimed refund amount available in the year 2020 which is expected to increase more in the year 2021.

The causes for the unclaimed refunds can be different for different taxpayers and so are the methods by which the refunds can be retrieved.

Unclaimed Tax Money and Refunds

According to the IRS, billions of refund checks are bounced back if your address has been changed or there has been a change in your bank account number. The IRS would be unaware of the information related to the new address /new bank account number. Your refund check would return and would lie unclaimed in such a scenario.

Another vital reason leading to unclaimed tax refunds is that you considered your income to be very low. As a result, you did not prepare your tax returns and did not e-file a tax return as well. For instance, you are a salaried professional, and taxes were being withheld from your paycheck every month. However, you considered your income too low and did not file the tax returns. But, you would be able to claim the money that has been deducted from your salary in the form of a tax refund. Also, there might be a probability that taxes were not being withheld from your paycheck but you can receive a refundable EITC (Earned Income Tax Credit).

How can you receive your unclaimed refunds?

Some of the methods by which you can easily receive your unclaimed refunds are:-

In case, it has been just less than a year when your tax refund was issued you can put forward a request to the IRS for reissue of the refund. This can be done by use of the IRS’s unclaimed refund database. In this case, for protection, you would have to provide your filing status, Social Security Number, and your refund amount as well. If there is a need to address updation, it can be done here. The advantageous part is that your information related to refund would remain available on this IRS website until the next tax return has been filed.
In another scenario, if it has been more than a year but less than three years since you filed your returns but have not received your refunds – you have two options available. You can request for your lost refund to be reissued. While filing the tax returns, you can use the “Married Filing Jointly” Status and complete Form 3911 which is the Taxpayer Statement Regarding Refund. Also, if you are not using this status you can give a call to the IRS at 1800-829-1954 to request for reissue of your refunds.
If after filing your return request, you found out that a particular credit or deduction would have led to a refund. Or you have made an error while filing your returns then you can make amendments to your tax return and get your unclaimed tax refund. This amendment can be done by filing Form 1040X and mailing it to the IRS. This can take some additional time i.e. up to 16 weeks but would get your unclaimed refunds.

Conclusion

So, if you have had tax refunds but have not obtained them due to some reasons you can still receive them. Filing a return within three years of the return due date and also filing a return for an earlier year will help you in avoiding penalties related to late returns.

How to leverage your income tax refunds amidst the COVID-19 pandemic?

by Mounica Kota | Jun 15, 2020 | 401(k), COVID - 19, Income Tax refunds, Roth IRA

How to leverage your income tax refunds amidst the

COVID-19 pandemic?

Currently, the entire world is facing the dreadful consequences of coronavirus. Millions and millions of people have been impacted and the global economy has come to a standstill. In the US, the impact of the pandemic COVID-19 is intensifying each day. Millions of Americans have become unemployed and the economy of the country is regressing.

In such difficult times when the livelihood of the common people has been impacted in such a worse manner, Americans see a dint of hope in the Income-tax refunds which they would obtain. Even though the Federal Government has provided Stimulus Checks, additional money is always helpful in such bad times.

If you have filed your Income Tax Returns and are waiting to receive a hefty amount from the IRS, then you should also think about avenues by which you can leverage your refunds during these critical times.

Let us have a look at some of the best options to leverage your income tax refunds during this pandemic COVID-19.

a.Emergency Savings Account

You should open a savings account and try to put a major part of your Income tax refund into that account as an Emergency Savings Account. This would be helpful in case emergencies are arising due to the pandemic such as a medical emergency or you lose your job, unfortunately. This Emergency Savings Account will be your savior in difficult times.

b.Increase your contribution into your 401(k)plan

You can utilize this opportunity to increase your contribution to your 401(k) plan. In case, you have been contributing only 3% of your paycheck but your employer matches up to 6% then you can double the pre-tax income which you are investing in your retirement funds. It can lead to your monthly paycheck being a little low but you will be investing for good and your taxable income would also be low.

c.Investment into Stocks

When you have already made your contributions to your retirement account, then you must invest your income tax refunds into purchasing stocks or mutual funds. Generally, the stock market would deliver better returns than that of a Savings Account and Treasury bonds. But, sometimes there are risks involved in the stock market and the returns are not guaranteed. Investment in stocks by tax refunds is a good idea if you are saving to attain long-term goals.

d.Paying down the existing debts

When you obtain your Income Tax returns, it is wiser to pay off your debts quickly. The high-interest debts must be paid off on priority as this would help you in saving a lot of money in the future. Usually,debts are associated with credit card dues and if you are fortunate enough to not have credit card dues then you should pay off your car loan or student loan.

e.Contribute to Regular or Roth IRA

If you are thinking about your long term savings, you must contribute your income tax refund into Regular or Roth IRA. If you and your spouse have a modified AGI of less than $203,000 then you can be able to contribute up to $6000 to Roth IRA in 2019 or $6500 if you are 50 years or above.

f.Contribute to HSA

You can open HSA if you do not have one as HSAs are a very good option to keep aside some money for medical expenses i.e. may be routine or emergency medical expenses. Your unused funds in the HSA keep on rolling to the consecutive years and the remaining money can be utilized during retirement once you are above 65 years of age.

g.Investment into an ETF

You can invest your income tax refunds in broadly diversified ETFs which are a safe investment option. ETFs would include thousands of stocks, low volatility, and any risk compared to individual stocks. Investing in ETFs would be good as they are passive and have a low expense ratio.

h.Make donations

This is a philanthropic option and perhaps one of the best ways to utilize your money obtained by a tax refund. You can make your donations into mainly those charitable organizations which support a good cause and are working towards a cause that you support.

In addition to all these available tax refund investment options, you must some a considerable amount of cash in your hand during these emergency times. Moreover, you can invest some of your money in self-care avenues like taking up any online courses/training or workshop. This would be helpful in your career in the future and would return you an incremented paycheck

References

All you need to know about an expected delay in tax refunds in 2020 due to COVID-19 pandemic

by Mounica Kota | Jun 2, 2020 | COVID - 19 pandemic, Income Tax refunds, IRS, Social Security Number, Tax Refund

All you need to know about an expected delay in tax refunds in 2020 due to COVID-19 pandemic

In response to the outbreak of the pandemic COVID-19, the Federal Government had delayed the deadline for filing Federal tax returns and for tax payment as well. However, it was advised that if you had to receive a tax refund from the IRS then it would be wise to file the tax returns soon. Due to the coronavirus and the social distancing norms, it was not only difficult for the taxpayers to prepare and file the returns but also for the IRS staff to process the refunds.

In these difficult times, it is always good to have some additional cash and everyone needs this additional amount but the tax refunds for 2020 would be delayed.

IRS Operations with a reduced workforce

The IRS offices were closed across the entire country and it was operating with limited staff and resources. The most important task which the IRS has been doing in the past two months was the issuing of Coronavirus Stimulus Payment to around 150 million Americans which can be termed as a “mission-critical” function.

Due to the outbreak of the pandemic COVID-19, the IRS had limited the services it was rendering. The live phone help has been suspended and even the Taxpayer Assistance Centers were closed. Still, the official webpage of the IRS says that they have been carrying out the critical functions pro-actively. Specifically, the IRS has been processing Federal tax returns and issuing refunds to the Americans even with limited staff. From 1st June 2020, many IRS staff members would have returned to their offices for performing those tasks which cannot be done from home. These staff members on resuming work would begin with the backlog of work they have which would mainly consist of processing tax returns and issuing refunds to the people.

Method of tax return filing – Reason for delay

According to the IRS, the fastest method by which you can receive your tax returns on time is by filing your tax returns electronically. Most of the taxpayers who would use the e-filing method and would choose Direct Deposit would receive their tax refunds within 21 days of the filing. However, there would be delays in obtaining tax refunds by those taxpayers who would opt for the paper return method.

More than 10% of the American population still uses the paper method for filing their tax returns. The closure of the IRS offices means that IRS would not be able to process those returns which have been mailed in. So, when the processing of returns would be delayed then obtaining a refund would also be delayed. Currently, it is unclear as to by when the IRS would be resuming the processing of those returns which have been filed by paper.

According to several reports, by 1st May 2020, the IRS had received around 125 million Federal Tax returns and it had processed 113 million tax returns approximately. There has been a 7.2% drop in the refund processing rate of the IRS due to the pandemic COVID-19. However, the average tax refund this year is $2973 and the IRS says that it does not expect any delay in issuing the outstanding refund requests as well.

Tax Refund Status

Usually, the tax refunds are issued to the taxpayers within less than 21 days of filing the tax returns. You would be able to track the status of your Federal Tax refund on the official website of the IRS after 24 hours of filing the tax returns.

The three important things needed for checking your Federal Tax refund status are

Social Security Number or Taxpayer Identification Number
The exact amount that would be refunded
Your filing status

Other causes for tax refund delays

Apart from the coronavirus, there can be some other reasons which would cause a delay in the process of obtaining tax refunds. In case, you have filed your tax returns too early and have claimed the Earned Income Tax Credit or the Additional Child Tax Credit then you will have to wait longer there might also be a delay if you have filed your federal tax returns either faster or later.Moreover, other causes for delay in obtaining your tax returns could be due to wrong Social Security Number, incorrect bank account number, misspelling of your name, wrong calculations or you have outstanding debts such as back taxes, child support, or Federal Student Loan, etc.

You can keep a tab on your Income-tax refunds by checking your Tax Refund Status regularly and understanding the details associated with tax refunds.