The IRS said that it is dealing with staffing shortages and a backlog of over 6 million individual tax returns from last year as of late December, and expects “enormous challenges” during this year’s tax filing season.
Get ahead of the headaches to come and don’t wait until the April 18 deadline to file. Here are some tips for ensuring that refund comes as quickly as it can.
1. Start gathering tax documents now, and don’t throw away any letter the IRS mails you.
Just because you can’t file your tax return yet doesn’t mean you can’t start organizing your documents. A lot of important tax documents are sent out soon.
“Most documents, you do have to keep in mind, may not arrive in your inbox or your mailbox until the end of this month, Jan. 31,” said Kemberley Washington, a New Orleans-based certified public accountant and former IRS agent. Keep an eye out for your W-2 if you have an employer, for example, plus any interest and dividend statements from a bank, Form 1099s if you did freelance work, or Form 1099-G if you received unemployment compensation, Washington said.
The deadline to file your tax return for 2021 is April 18, 2022, unless you live in Maine or Massachusetts, where the deadline is April 19 because of the Patriots’ Day holiday. But don’t wait until then. To avoid any additional delays, “as soon as you gather all of your documents, make sure that you file your tax return as soon as possible,” Washington said.
If you received money from the third economic stimulus payment or if you are one of the millions of Americans who got a payment from the expanded child tax credit, that will need to be reconciled against your 2021 tax return.
If you fall into the child tax credit group, the IRS will be sending you Letter 6419, 2021 advance CTC, which will include the total amount of advance Child Tax Credit payments you got in 2021 and the number of qualifying children used to calculate these payments.
If you got money from the third round of economic stimulus payments, the IRS will issue you Letter 6475, which will let you know if you are entitled to and should claim the Recovery Rebate Credit on your tax return.
“When the taxpayer receives that letter, I would recommend holding on to that letter. When it comes time to prepare that tax return, we need to put in the exact amount that that person received,” said Minnie Sage, the program director of Tax-Aid, a nonprofit that provides free tax services to the San Francisco Bay Area. “If it’s off by any amount, that’s going to slow down the return.”
She also noted you should look out for any state or local letters regarding tax information, such as the Golden State stimulus payment in California.
If you happen to throw out or lose these letters, double-check your bank statements to find the exact amounts of any payments, or if you have an online IRS account, you can look up the exact amount you received federally, Sage suggested.
2. Avoid filing or getting a return by paper, and sign up for direct deposit.
“Whenever possible, a taxpayer should always electronically file their return,” Sage said.
Even the IRS agrees that filing or receiving a return or refund by paper is not recommended. On their website, they directly state that filing your tax return electronically and choosing the option of a direct deposit for your refund is the “the fastest and safest way to receive your money.”
That’s because getting a return check physically sent to you creates the chance it will get lost or stolen or returned to the IRS as undeliverable.
Even knowing the status of your refund can be delayed if you choose paper. The IRS tracker tool “Where’s My Refund?” updates taxpayers on the status of approvals and issuance of refunds. And according to the IRS website, the status of your refund will be available within one day after the IRS accepts your electronic tax return, but if you file by paper, it can take up to four weeks after it is mailed.
Keep in mind that some refunds will not be sent until after a set date. For example, refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) can’t be issued before mid-February due to a security measure within the Protecting Americans from Tax Hikes (PATH) Act.
The IRS says it sends out most tax refunds in less than 21 days, but it acknowledged that due to COVID-19-related delays, it has taken longer for the agency to issue refunds for returns that are incomplete, contain an error or claim an EITC or ACTC.
“If you file electronically, if you file free and clear of any errors, if you choose direct deposit, you will get it back within 21 days. I have seen that to be the case,” Washington said. “But it’s any time you don’t have those three different criteria that individuals may see a longer time as it relates to getting their money back.”