Friday, June 6, 2014

How Fast Can I Get my Refund?

If you like the blog, buy my book: Everyday Taxes!

This is a very untimely post, but I was writing about it for my upcoming book and decided it HAD to be a blog post so...

That's the most common question, and the answer is, despite anything anyone tells you, I don't know.  Anyone who promises to get you your refund faster than someone else is, as I said before, full of crap.  There are things you can do to make sure it doesn't go slower, those being: electronically file, make sure it's accurate, don't owe any government agencies money, and use direct deposit.  By not owe government agencies money, I mean, delinquent student loans, child support, government benefit agencies, and of course, back taxes.  If you do, the government can, and will, take the money out of your tax return, and it often delays the return as well.  If you ever get less money from the Feds than you expected, this is a likely culprit.  

I'm sure the answer above isn't very satisfactory, so I'll expound on it.  The IRS says you can expect an electronically filed refund in 10-21 days assuming there are no issues.  In fact, last year the IRS wouldn't even talk to you about your refund status unless it had been at least 21 days.  This pissed a lot of people off, but I agree with the IRS (this time).  People start calling the IRS after 14 days and tie up the lines that should be getting used to answer real questions and deal with real problems.  Do yourself and everyone else a favor, don't worry for 21 days.  You can check the status of your refund HERE.  You need your SSN, filing status, and your refund amount.  If you use a professional that takes your fees out of your refund, make sure you use the original refund amount, not the amount you will be getting after fees.  The honest truth is that the most people will get their money in 6 to14 days, and the vast majority within 28 days.  If it takes longer, either you (or your preparer) did something wrong, the IRS is taking a longer look (nothing you can do about this) or the IRS is messing up (not too likely, but it happens).  The Where's my Refund system at the link above should give you an update as to the cause of the delay, and sometimes tell you what to do.  You will also generally get a letter if the IRS decides to take an extended look.

Having said all of the above, those dates are from the time the return is accepted, and are the time frames for your money to get to the bank (your bank can legally hold a direct deposit for 4 days after receiving it, but if they do, I'd find a new bank).  When you send your return to the IRS electronically, they do a number of checks immediately, and, if they fail, it is rejected.  Common causes for rejection are names, SSN's, or birthdays on the return not matching IRS records, A person on the return has already been claimed or already filed, last year's Adjusted Gross Income that you provide to software isn't correct, or not including First Time Home Buyer's Credit payback on the return when required.  There are literally hundreds of other reject causes, but suffice it to say, the clock in the paragraph above doesn't start until you correct the problem and resubmit.  Most rejection problems are easy to solve, and, if you use a professional they should walk you through solving them.  I would say that 80% of my client's rejections are solved over the phone in 24 hours, another 10% require modifications to the return that affects the refund, about 5% require the return to be mailed in, and about 5% don't get resolved because the client disappears, or is unable or unwilling to make the changes required to the return.  If your return gets rejected, don't panic.  Your software support or tax pro should be able to help. 

Now let's mention a few wrinkles that some tax companies will introduce.  The first one is a system for withholding your tax preparation fees from your refund.  The way this works is that you agree to have your refund deposited with the tax companies bank, who immediately forwards the money (minus fees) to your bank account.  The main thing to understand about this is that they have no control over the speed of your refund.  They don't send you your money until the IRS sends it to them.  If the IRS sends you less, you get less.  If the IRS doesn't send enough to cover the fees, the company will expect you to make up the difference.  They will also take any back fees that you owe them from prior tax returns.  Also, if you are a careful tax return reviewer, you might panic that the direct deposit information on the back of the Form 1040 is wrong.  That's because it's the bank's information, and that's okay.  There is almost always a fee for this service, but it's usually not too much.  My mantra is that the fastest and cheapest way to get your tax return from a professional is pay the fee up front, electronically file, and use direct deposit.

Last thing is getting your money faster than the IRS sends it to you.  No matter what they call it, this is a LOAN.  They are required to disclose this fact, but not all are as conscientious about it.  Couple things to know about these.  First, they are EXPENSIVE.  Since the loan is for only a couple weeks, the interest has to be outrageous to make any money.  Plus, your fees have to cover them for the people who don't end up getting a refund.  The second thing is that they're not guaranteed.  Once you e-file, the bank can approve or disapprove the loan.  Generally if they say no, you only get charged for the conventional product of having your fees withheld and the timing is just like any other product.  The big thing to know is, if they loan you money, and the IRS doesn't issue you a refund to pay it off, the bank will want their money back.  This can be a lot of money.  My advice is to avoid these like the plague. 

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