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.

References

Unclaimed refund lying with IRS. Here is how to get your unclaimed refund?

by Mounica Kota | Jul 28, 2020 | IRS, refund due, Taxpayers

Unclaimed refund lying with IRS. Here is how to get your unclaimed refund?

Since 2016, there is more than $1.5 billion as outstanding refunds with the IRS which remains unclaimed. This implies there might have been more than around one million taxpayers who may be qualifying to obtain tax refunds but did not file their income tax return.

In case, you are due for a tax refund you must file a federal income tax return to obtain your money.

A three-year window

According to the IRS, you have a window of three years within which you can file your tax return and would be able to claim any tax refund which is due. This window of three years begins on the original date when your return was due or the extended due date in case if you had filed for an extension. For the current year, this due date is 15th July 2020 or it is 15th October 2020 if an extension was filed by you.

In case, you miss out on this three-year window you would not be able to get back the money. The money will then belong to the US Treasury and you would have no right to claim the money anymore.

Why you might be having a refund due?

If in 2016, you were filing your federal tax return as a single taxpayer who was below the age of 65 years and had an income less than $6300 then you didn’t need to file the tax returns. You can consider that income tax has been deducted by your employer throughout the year and the IRS owes to return you that. Since you were not needed to file the federal tax return you had not filed which would have been of great interest to you.
Your income level in 2016 might be eligible to obtain a tax credit which can only be availed by filing a tax return. Due to your low or moderate-income level for the year 2016, it would be feasible that you might be eligible to obtain the EITC (Earned Income Tax Credit).

Below-mentioned are the income thresholds for 2016 and if your income for 2016 was below these limits, you would be eligible to obtain ETIC and can be done by filing tax returns by the 15th of July 2020.

For single individuals and having three or more qualifying children-$47955 whereas it is $53,505 for a married couple and filing the tax return jointly.
For single individuals who are having two or more qualifying children-$44648 whereas it is $50,198 for a married couple and filing the tax return jointly.
For single individuals who are having one or more qualifying children-$39,296 whereas it is $44,846 for a married couple who are filing the tax return jointly.
For single individuals having no qualifying children-$14,880 whereas it is $20,430 for a married couple who are filing the tax return jointly.

There are some other tax credits as well which you might be qualifying to claim for 2016 such as Adoption credit, Additional child tax credit, health coverage tax credit, American opportunity credit, etc.
You would be able to obtain tax credits and other tax breaks only when you file your federal income tax return. No penalty is charged for failing to file the tax return when you already have a penalty due.

How will you get back your refund?

To get back your refund, you will need the forms W-2, 1098, 1099 or Form 5498 from the year 2016. In case, you do not have these old forms you can place requests for copies of these forms with your employer, bank, or other payers. You can also the IRS tool i.e. Get Transcript Online tool on the website of the IRS where you would be able to obtain your free wage and income transcript. You might need a copy of the Form 1040, Form 1040A or Form 1040EZ from the year 2016. You can easily obtain these forms and necessary instructions on the IRS.gov Forms and Publications page.

If you have money to be paid back for student loans, any back taxes, or child support then the refund amount would be offset for the tax amount you owe to pay. Moreover, if you have not filed your tax returns for the year 2017 or 2018 then it is quite probable that the IRS would hold back your tax refund.

Conclusion

Hence, this is your chance to claim your refunds back and you should not miss this opportunity failing which the money would belong to the IRS forever.

Top #10 things to know about IRS and its working amidst the pandemic

by Mounica Kota | May 30, 2020 | COVID - 19 pandemic, federal government, IRS, tax return, taxes, US Government

Top #10 things to know about IRS and its working amidst the pandemic

The outbreak of the pandemic COVID-19 has brought a tough time for everyone. With the economic lives of people being hugely affected due to the coronavirus, the US Government has taken various steps for providing relief to the Americans.The Coronavirus Stimulus Package under the CARES Act is one such major step taken by the Federal Government which would be of certain help to the Americans for dealing with financial issues arising due to the pandemic.

The Internal Revenue Service (IRS) has been playing a major role in the implementation of the various tax laws which have been passed recently by the Federal Government. Along with the normal course of operational activities of the IRS associated with filing of tax returns and their processing, it is also working tirelessly towards the determination and distribution of the Stimulus payments to the eligible taxpayers.

Let us have a look at the major 10 things which we should know about the operations and working of the IRS during the outbreak of COVID-19.

a.Information Center for all queries

The official website of the IRS i.e. IRS.gov/coronavirus is the first place where the taxpayers can find answers to all of their queries related to tax returns and stimulus payments.All updates associated with tax returns processing and stimulus package would be posted by the IRS therein this website. The taxpayers should avoid calling up the IRS and check out the IRS.gov/coronavirus website for tax updates amidst the pandemic.

b.Limited live assistance from IRS

The phone lines of the IRS and the Assistance Centers for taxpayers are to be non-functional for an infinite period.The IRS hotlines including service as well as compliance hotlines such as automated under reporter, collection functions, etc. are not operational for long. Moreover, the IRS has suspended all compliance activities related to tax such as audit and collection till 15th July 2020.So, taxpayers and tax professionals should not worry about missing the tax deadlines. The Local Taxpayer Assistance Centers are also not operational currently.

c.All audits to be put on hold

The IRS has announced that all new audits have been suspended and would resume only after 15th July 2020. But, it is quite obvious for the taxpayers to expect that the IRS must utilize the audit power it has to prevent the erroneous tax refunds.The IRS would be filing filters that would help in stopping suspicious refunds such as Earned Income Tax Credit Returns, suspected identity theft returns, etc. till the taxpayers would be able to verify the returns.So, this freezing of the refund audits will continue and would be troublesome for taxpayers as they will not be receiving any prompt response from the IRS.Moreover, taxpayers can take advice from the local Taxpayer Advocate Service Office in case of facing any queries due to the withholding of audits and refunds.

d.Temporary respite if a taxpayer owes tax

The IRS has halted the enforcement of any tax collection till 15th July 2020. Moreover, all the pending collection alternatives by the IRS and any offers related to compromises in tax laws are also on hold till 15th July 2020. According to the provisions of the People First Initiative, liens, levies, and any restrictions on passport have also been put on hold.

e.Difficulty in reaching out to the IRS even after COVID-19 is over

The IRS would even have its phone lines and hotlines non-functional after the pandemic is over.After the normal operations start, the resources of the IRS would be occupied with the backlog of tax filing issues and people trying to contact the IRS for other tax filing assistance. However, the IRS would be providing other means such as email or e-fax by which taxpayers would submit their documents.

f.Tax returns are still being processed by the IRS

The stimulus payments are being processed by using the information related to the tax returns of 2019 or 2018. If an individual has not filed his tax returns for 2019 or 2018, then this is the right time to do it now. The returns can be e-filed easily and can get accepted in a day without any inconvenience.

g.No requirement of monthly installment agreement payment

Under the provisions of the “People First Initiative”, the IRS has announced that taxpayers can skip their monthly installment payment during the period of 1st April 2020 to 15th July 2020. This would not be considered as a tax payment default by the IRS.

h.Account-related queries can be sorted by IRS transcripts

Taxpayers can obtain their transcripts by creating an IRS account online, review these transcripts and get solutions to any queries related to issues like previous AGI, amount of penalty, amount of estimated tax payments, etc.

i.Any hardship-TAS can be reached

Any taxpayer facing financial hardships and having a hold on their tax refunds can contact their local advocate for suggestions. However, the central TAS hotline would remain closed.

j.Stimulus payment will not be used by IRS tax collectors

The IRS has made it clear that it would not use the stimulus payment of any individual for paying off of any tax debt owed by the individual taxpayer.Hence, the IRS is playing a commendable role in helping the common people in improving their economic lives during this difficult time.

References

https://www.accountingtoday.com/list/10-things-to-know-about-irs-operations-during-the-coronavirus-pandemic

https://taxfoundation.org/coronavirus-tax-tracker-covid19/

Key Take-away from the IRS’ announcement on “cross-border tax guidance related to travel disruptions arising from the COVID-19 emergency”

by Mounica Kota | May 21, 2020 | COVID - 19, COVID - 19 pandemic, IRS, Tax benefits, Tax guidance, Tax Payers, taxes, US Government

Key Take-away from the IRS’ announcement on “cross-border tax guidance related to travel disruptions arising from the COVID-19 emergency”

Due to huge adverse impacts being created by the outbreak of the pandemic COVID-19, social distancing and restrictions on the travel of people residing in the US have been imposed by the US Government. These restrictions imposed on the travel of the people residing in the US are sure to raise queries on the taxation policies and guidelines.

The IRS and the Treasury Department of the US have together issued tax guidelines which would help provide some relief to those people/businesses which have been impacted by these travel restrictions imposed due to COVID-19.

The major highlights of this tax guidance can be listed below.

Revenue Procedure 2020-20
Revenue Procedure 2020-27
An FAQ

The Highlights Of This Tax Guidance

1.Revenue Procedure 2020-20

The Revenue Procedure 2020-20 provides the guidance that under specific circumstances up to a period of 60 consecutive calendar days of presence in the US due to travel disruptions caused because of COVID-19 would not be counted for determination of the US Tax Residency and for other purposes such as qualification for tax treaty benefits for income obtained from the personal services that have been performed in the US.

a.The pandemic COVID-19 has affected the travel plans of many foreign travelers who had planned to leave the US. Even though foreign travelers who test negative for COVID-19 are not being able to leave the US due to cancelation of flights, border closures, and other disruptions.

b.An alien individual would be considered as a US resident for a year under the substantial presence test in the calendar year if

The individual has been present in the US on at least 31 days during the tested calendar year.
The sum of the number of days of presence in the tested calendar year plus one-third of the number of days of presence in the previous calendar year plus one-sixth of the number of days of presence in the second preceding calendar year equal to 103 days or more.

c.Medical condition exception means an alien individual would not be considered as present in the US on those days when he intended to leave the US but was not able to do so due to serious medical condition which arose when the person was in the US.

d.Those individuals who are claiming the Medical Condition Exception need to file the Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition for filing Form 1040-NR. However, under certain circumstances, the need for timely file Form 8843 might be not taken into consideration.

e.The COVID-19 emergency would be considered as a Medical Condition Exception while determining his eligibility for treaty benefits and revenue procedures. For revenue procedure, an individual would be considered to have intended to leave the country unless he has applied for becoming a resident of the US. Also, for obtaining treaty benefits an individual would be presumed to be unable to leave the country during the period of COVID-19.

2.Revenue Procedure 2020-27

The IRS and the Department of Treasury have provided a waiver of the time requirements for revenue procedure and eligibility for treaty benefits. This Revenue procedure provides the qualification for being excluded from gross income under the IRC Section 911 and would not be impacted because of the days spent away from a foreign nation due to COVID-19.

a.A qualified individual can elect to exclude from the gross income of the individual’s foreign earned income and the housing cost amount.

b.The IRS and the Treasury Department have determined that the COVID-19 is an emergency. For IRC Section 911, an individual who had left China on/ after 1st December 2019, or any other foreign nation on/after 1st February 2020, but on/ before 15th July 2020, would be considered as a qualified individual concerning the period during which he was present in, or was a bona fide resident of, that foreign nation if the individual can establish an expectation that he would have met the requirements of the IRC Section 911 for COVID-19 emergency.

c.To qualify for relief for the revenue procedure, an individual must have been physically present, in the foreign nation on/ before the applicable date specified for this revenue procedure. An individual who was physically present or in China after 1st December 2019 or another foreign nation after 1st February 2020 would not be eligible to use this revenue procedure.

d.Individuals trying to qualify for the section 911 foreign earned income exclusion as they have been expected to be present in a foreign country for 330 days for the outbreak of COVID-19 and have met the other 4 requirements for qualification may use any 12 months to meet the qualified individual requirement.

3.FAQ

FAQ specifies that specific business activities which are conducted by foreign corporations or by a non-resident alien will not be considered in the 60 consecutive calendar days for determination if the individual or the business is engaged in some US business or has a permanent establishment in the US only if those business activities would not have been conducted in the US due to the travel disruptions caused due to COVID-19.

Hence, these tax guidelines framed by the IRS are also being continuously monitored by the IRS and the Treasury Department. Taxpayers can visit the IRS website and obtain further information related to this.

References

IRS Tax Refund

by Mounica Kota | Nov 28, 2017 | Tax Refund

IRS Tax Refund

IRS Tax Refund,According to the information available to the IRS, every year a substantial number (about 75-80%) of the taxpayers are eligible for tax refunds in some form or the other. Of course, there are different clauses and conditions when it comes to tax refunds, but the general idea remains the same.

If you have paid more taxes than what you are liable for, the government issues a refund for the same, as long as you meet all the conditions.

You have filed your tax returns and realize that the government owes you a certain amount of money. That can be both exciting as well as confusing. It is exciting because you are eligible for a refund and confusing because you have no idea when you can realize those refunds.

Tracking IRS Tax Refunds

The IRS has several useful tools available for its taxpayers, but the Refund tracking tool is something that all the taxpayers rejoice.

If you visit the IRS website, you get an option of “Where’s My Refund”.

This is the most accurate medium for checking your tax refunds, as the IRS updates the entities every 24 hours. You need not be a techno wiz craft to use the tool as well. All that you need is your Social Security Number or Employee Identification Number, whichever was used for filing of taxes. Up next, you would need the filing status, such as single, married jointly filing or married filing separately etc. And lastly the exact amount of tax refunds.

Individuals who have filed their taxes electronically can track their refunds after 24 hours of their tax filing. On the other hand, if you have done it the old school way you will have to wait for a minimum of four weeks. The usual turnaround time for processing of refunds is about three weeks, but it at times it might take a bit longer owing to the fact that the IRS is underpowered when it comes to resources.

Don’t forget to check out Best Investments for Boosting Your Tax Refund

Missing Refunds

While opting for tax refunds, the safest and easiest option is to provide your details and the amount gets credited directly into your bank account. As you do not have to worry about the check and its traversal, it is the safest option as well. And the quickest as well, since you do not have to visit the bank or ATM to encash the same.

Quite a few individuals or taxpayers to be specific opt for getting the refunds in the form of checks. In fact, the IRS does not allow more than three deposits per year for a specific bank account, so you might have to resort to checks in such cases. Though is it not a usual occurrence, there are chances of the same getting lost from time to time. You should immediately reach out to the IRS in such a scenario to trace your missing check. There are two possible outcomes when it comes to a missing check, either it was cashed or it wasn’t. The IRS will investigate and find out if the check has been cashed or not. If no, they will send out a replacement check for you. If yes, the IRS then starts working towards a claims package. Once all the formalities are over, they will issue a replacement check.

If you have opted for filing your tax returns electronically, you can expect the refunds within 21 days of the filing.

But when it comes to refunds for paper returns, the IRS takes about 6-8 weeks and the duration reaches 8-12 weeks if there are amendments to the returns. Make sure you wait for the mentioned timelines before reaching out to IRS regarding the same.

Looking to get bigger IRS tax refunds, click here to know how.