McVay Business Services - Accounting & Tax Services Pensacola, FL
Taxes are confusing anyway, but when a filing season has some special considerations, the misinformation increases. And with the availability of social media, the tax myths multiply.
That's happening this year since refunds from some very specific tax returns are, by law, being held until the middle of February.
Here are five tax refund myths the Internal Revenue Service says are making the rounds, along with the truth about the situation.
Myth 1: All Refunds Are Delayed
Yes, some refunds are delayed, but not every single one.
The Protecting Americans from Tax Hikes, or PATH, Act has a provision that prohibits the IRS from issuing refunds connected to two refundable tax credits until Feb. 15. Refundable tax credits are those that, after you use them to offset any tax you owe, can get you a refund of the excess credit amount. The Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) are two popular refundable credits, and claims of these tax breaks are the ones that PATH has mandated will put your refund on hold this filing season.
But that's where the truth stops and the refund myth starts.
The IRS says that more than 90 percent of federal tax refunds are issued in the normal time frame, which is less than 21 days. Some other returns might take a bit longer because, in many cases, they are getting additional attention for a variety of reasons, including new efforts by the IRS to crack down on fake tax returns and fraudulent refunds.
So if you don't claim the EITC or ACTC, then chances are good that you'll get your refund within three weeks after filing.
Myth 2: Calling the IRS or My Tax Professional Will Provide a Better Refund Date
There are lots of good reasons to use a tax professional rather than doing your taxes yourself. It is a myth, however, that bugging your tax preparer, or the IRS itself, will get your refund to you more quickly.
In reality, says the IRS, the best way to check the status of a refund is online at IRS.gov's "Where’s My Refund?" tool. If you're away from your laptop or PC, then use your digital device to check via the IRS2Go mobile app.
But don't go crazy with the checking. The IRS updates the status of refunds once a day, usually overnight. Checking either status option more than once a day will not produce new information.
And no, trying to connect with a real person at the IRS won't get you any additional info. Plus, at this time of year, you'll be on hold for a while. So leave those IRS reps alone to answer tax-filing phone questions from other folks. Only call for added help if the refund status tool or app instructs you to do so.
Myth 3: Ordering a Tax Transcript a "Secret Way" to Get a Refund Date
We all love special life hacks that help up do things more quickly or make tasks easier. The same is true when it comes to taxes.
But as far as your tax refund, ordering a tax transcript will not help you find out any sooner exactly when you'll get your refund. It's unclear how this myth got started since, notes the IRS, the information on a transcript does not necessarily reflect the amount or timing of a refund.
You, of course, can and should order a transcript to validate past income and tax filing status for mortgage, student and small business loan applications. You also might need a transcript's prior year tax data to help with your current tax return preparation.
But no, don't order a transcript to try find out when your refund will be issued.
Myth 4: "Where's My Refund?" Must be Wrong Because There's No Deposit Date Yet
If you claimed the EITC or ACTC (or both) on your return and now are checking (just once a day!) "Where's My Refund?" on both IRS.gov or the IRS2Go mobile app, the IRS says you're not going to get a projected refund date from either status option.
Those EITC and ACTC refunds that are on legislatively-mandated hold will not be updated with projected deposit dates until a few days after Feb. 15.
Neither will you see a refund date through your software package until then. And no, says the IRS, tax preparers won't have any additional information on refund dates before then either.
The good news is that Feb. 15 is next week.
The bad news is that when you take into account the full refund issuing process, including the upcoming President's Day three-day federal holiday, the delayed refunds likely will not start arriving in bank accounts or on debit cards until the week of Feb. 27. And that's a best-case scenario.
Myth 5: Delayed Refunds, those Claiming EITC and/or ACTC, will be Delivered on Feb. 15
Really? Someone started a story that the IRS was going to get all of the refunds it has to hold out on the very first day it can issue them?
I want to meet the people who have such confidence in the tax agency's efficiency.
Now I'm not picking on the IRS. It's got a tough job, dealing with 150 million or more taxpayers every filing season, while also making sure its computer systems are updated with the latest tax code provisions. This must be done during a time of decreasing funds and fewer employees.
Adding a new hurdle, like a delay of refunds for those who claim certain tax credits, makes the IRS' usual job even harder.
Anyone who thinks the agency will be able to get all the EITC and ACTC related refunds out on the very first day it can is, at best, delusional overly optimistic.
The IRS understands that folks who claim these two tax credits tend to be lower income taxpayers who rely on the refunds the tax credits create. And it will do its best to get them out as quickly after Feb. 15 as it can.
But for most affected filers, that is not going to happen on Feb. 15.
I (and the IRS) wish we had better news for all y'all expecting refunds, whether from claiming the EITC, ACTC or other tax provisions that helped you get your withheld money back from Uncle Sam.
But at least now you know the real deal with refunds, rather than these myths that have been circulating. And with each new day, you're closer to getting your refund.
Mike McVay, Tax Accountant - 850-725-5696 - www.PensacolaFLTax.com
Mike McVay, Tax Accountant Blog
Certified QuickBooks ProAdvisor & Licensed Tax Accountant Pensacola, FL
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