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.

Is your income tax refund guaranteed?

by Mounica Kota | Oct 21, 2020 | income tax, IRS Tax Refunds, tax filing, Tax Refund

Is your income tax refund guaranteed?

You would file a tax return claiming the refund of your income tax if the excessive deduction of tax has been done at the source or during the payment of self-assessment tax. Your income tax refund is guaranteed if you and the IRS are on the same terms related to your refunds. Mostly, the IRS pays back the refunds within 10-15 days of the receipt of the tax return filing.

There are some major factors that would help you to determine how fast you can receive your tax refund.

How early you have filed your income tax return?
If you e-filed the tax refund or have sent by mail?
If you are claiming any tax credits such as EITC and CTC
If you have any existing debts with the Federal Government or not

Once your tax returns have been e-filed, you can check the status of your tax returns by

You can use the Where’s My Refund tool by the IRS to find out the status of your income tax refund.
You can also call the IRS on the Customer Support number to understand the status of your tax refund.

Can your tax refund be held back?

Your tax refunds can be held back by the IRS and then obtaining your tax refund may not be guaranteed under the below-mentioned scenarios.

a.The inaccuracy of your tax return

Your tax refund can be held back by the IRS if there has been an error made by you while filing your tax returns. There are chances that there is a discrepancy in the return that has been filed in the past.

If the IRS thinks that there has been an error made by you while filing your tax returns, then your refund can be changed by the IRS. In case, you feel that the change has done is incorrect, you can prove this to the IRS and ask for a reversal. You have 60 days within which you can do so. After 60 days are over, you will have to file for an amended return so that the IRS would issue your refund.
If you have claimed some erroneous deductions, then the IRS can conduct an audit to find out about the accuracy of your tax returns. If you can prove to the IRS that the claimed deductions are correct then the IRS will issue your refund.
The IRS has the authority to freeze your refund if your previous tax returns are being audited and it feels that you owe additional taxes to the IRS.

b.You owe back taxes

If you have pending taxes to be paid to the IRS, then the IRS would keep your refund to pay your taxes. The IRS can also take your refund if you are on a payment plan known as an Installment Agreement. However, if you are unable to pay your taxes in one go you must get into a payment agreement with the IRS for minimizing your penalties. This would also help in the prevention of collection enforcement actions.

c.You have unfiled back tax returns

In case, you have unfiled tax returns then the IRS can freeze your refund and start a delinquent return inquiry. This will continue until you have filed your pending tax returns and have also cleared all the associated pending tax bills.

d. A problem in your tax account

The IRS might suspect some problem with your IRS tax account and thus hold your tax refunds.

Victim of tax identity theft –

The IRS might suspect that there has been a tax identity theft. You will have to contact the IRS for proving your identity. Once, your identity is proved you can obtain your tax refund easily.

Dependent related discrepancy –

This might happen when someone else has claimed your child as a dependent on his tax return. You will have to explain and prove it to the IRS that you should be able to claim the dependent on your tax refund.

e.Other debt

There are some other categories of debts that might be pending on you such as Student loans, Child Support, Unemployment compensation re-payments, or the State Taxes. These debts can be collected from the IRS by holding on to your refunds. However, to resolve this problem you would have to get in touch with the source of your debt and not the IRS.

So, if any of these reasons are not expected in your case then your income tax refund is guaranteed.

Who qualifies to be your dependent when you file your Income Tax Return?

by Mounica Kota | Oct 10, 2020 | income tax, IRS Tax Refunds, tax filing, tax returns, taxes

Who qualifies to be your dependent when you file

your Income Tax Return?

By claiming your dependents, you would be able to save a huge amount of taxes. So, if you have a family you must know how the dependents are defined by the IRS for income tax purposes. However, you may not completely aware of who in your family can qualify as your dependent or not.

Who would qualify as a dependent?

Mainly, there are two types of dependents i.e.

Your qualifying child
A qualifying relative

In both the conditions, the below-mentioned criteria must be fulfilled for qualifying to become dependent.

The person must be a US citizen, a US resident, a US national, or a Canadian/Mexican resident. Some people think of claiming a foreign exchange student who is staying with them temporarily. This is feasible only if the foreign exchange student fulfills this above-mentioned condition.
You would not be able to claim a person as your dependent if he claims a personal exemption for himself or is claiming another dependent on his tax forms.
You would not be able to support the claim of a person who is married and files taxes jointly with his spouse.

Qualifying child.

To be a qualifying child, the child doesn’t need to be your biological child. The child must be related to you and can be your brother, sister, adopted child, stepchild, niece, or nephew as well.
The qualifying child must be below the age of 19 years unless he is suffering from some disability (permanent and total). However, there is an exception to this rule and you can claim a child in case of him being below the age of 24 years and being a full-time student for a minimum period of 5 months in a year.
The child should be a citizen of the US, US national, or a United States/Canadian/Mexican resident.
A child would be qualifying if he is dependent but not self-supporting. He must be living with you for more than a year unless there are exceptions like living with the other parent in cases of divorce or being temporarily absent, etc.
If you and your spouse have been divorced then, you can use the tie-breaker rules found in the IRS Publication 501. These tie-breaker rules are the basis for the establishment of income, the parentage, and even the residency requirements for claiming the child.

Qualifying relative.

In case, you are supporting your parents or any other relative then certain conditions should be fulfilled to claim the dependency exemption.

The person whom you are supporting should be your relative and this category of relatives would include:-

Your biological child, your foster child, your stepchild, or, your grandchild.
Your siblings, half-brother, half-sister, stepbrother, step-sister, or the descendants of your siblings.
Your parents, stepfather, stepmother, grandparents, or other ancestors.
Uncle or Aunt such as brother or sister of your parents
Your in-laws can include your father-in-law, mother-in-law, daughter-in-law, son-in-law, brother-in-law, or sister-in-law. However, this can only be feasible when the marriage is active and not if there has been a divorce or separation.

The person whom you are supporting must have a taxable income not more than $4200 in the year 2019. However, this limit goes up every year with the changing rules.

The relative who would be qualifying for obtaining a tax exemption must have been living at your residence throughout the year or would be on the list of those people who do not live with you.

You should have paid for the support of the person in more than half of the person is being supported by multiple people who agree in multiple support agreements that the exemption can be claimed by you.

Conclusion.

So, the process of including qualified dependents for claiming tax exemptions is one of the best benefits which you can avail. By claiming these dependents, you can very easily avail several tax credits and deductions which would help in reducing your tax bills. Hence, you must understand carefully the qualifying criteria for claiming dependents failing which you would miss the opportunity of availing the benefit of low tax bills.

All you need to know about a delay in IRS Refunds in 2020

by Mounica Kota | Aug 3, 2020 | IRS, IRS Tax Refunds, Tax Return Delay

All you need to know about a delay in IRS Refunds in 2020

The US Treasury Department and the IRS had delayed the deadline for a federal tax return by three months to reduce the economic stress on the Americans caused due to the pandemic COVID-19. Due to the widespread impact of the novel coronavirus, the Federal Government has been urging the Americans to maintain social distancing. Due to the social distancing norms, the IRS had to close its offices around the country and operate with limited staff. Moreover, for around 2-3 months the IRS has been only performing the “Mission-Critical” functions which mainly included delivering Stimulus Checks to the Americans.

Many IRS officers have returned to offices last month to perform those tasks which cannot be performed from home. These tasks mainly include processing the federal income tax returns of the taxpayers and there is a huge backlog of work to be completed by the IRS officials.

How long does it take for the IRS to process tax refunds?

Generally, the IRS would issue a tax refund to the taxpayers within 21 days of accepting the tax return request.
If your return request has been filed electronically it would take the IRS maximum of 3 days to accept the request whereas if it is filed by the paper medium it would take additional 3 weeks to accept the request.
Due to the pandemic COVID-19, return requests filed by paper have not been processed and there has been a huge backlog. If you have mailed your tax returns by 15th July 2020 then you must be prepared for the huge delay.

Major reasons for tax refund delay in 2020

Let us have a look at some of the major reasons for the delay in a tax refund for the year 2020.

Filing early or late – If you have filed your returns earlier, you would wait eagerly to receive your returns. However, the early filers might even have to wait for long. The IRS is still making certain changes into its processes and has a lot of backlog work to finish up due to the pandemic. The changes in processes can include updated security measures or any other process tweaks.

Claiming certain credits – Your tax returns might be delayed if you filed them early but have claimed certain credits like Earned Income Tax Credit or Additional Child Tax Credit. You can keep checking the status of your return on the “Where’s my refund tool” of the IRS.

Filing done by paper returns – This is one of the most common causes for your tax refunds being delayed. Tax returns filed by paper means would take a longer time for being processed and also for the issue of the refund too. Sending of checks through mail also opens up the possibilities of your check being lost or being sent to a wrong address. So, this would delay the entire refund process.

Outstanding debts – The IRS can also garnish your refunds if you had defaulted on a federal student loan, if you owe money for back taxes, if you owe money for child support or if you filed a joint return and your spouse has outstanding debts. By garnishment, the IRS can withhold money from you to put it towards some other task.

Security measures – The IRS maintains strict security measures to combat identity theft. There are some security measures due to which the IRS can increase its processing time. There might be a scenario where the IRS suspects that there has been a tax return filed for you by stealing your identity. This can delay your return and you might obtain it after the investigation has been completed by the IRS. Sometimes, the IRS may also feel that the bank account mentioned in the return is suspicious and does not belong to you; in this case, the IRS would send it to you as a paper check.

Incorrect bank information – Your account number and bank details should be correct while filing your tax returns. If you have entered the wrong information and the refund has not been sent by the IRS, you can call on the toll-free number and request to stop the processing. If the refund has already been sent by the IRS, then you can contact the financial institution to send the payment back to the IRS and the IRS would issue you the refund as a paper check. However, if the financial institution does not agree to send the refund back to the IRS you would have to file Form 3911.

Mistakes on your return – In case, there are any mistakes in your return such as any mathematical errors or incorrect personal information then the IRS would take a long time in processing them. This would slow down the process of a potential refund. The IRS would contact you for any mistakes in your return and in some cases, it might amend your minor errors as well.

Conclusion

So, if you have not received your tax refunds yet you can call the IRS or check the status of your refund on “Where’s my refund?” in the www.irs.gov/refunds webpage.