The term ‘tax refund’ has a positive ring to it. A large majority of Americans wait for this season of the year when tax refunds hit their bank accounts. Tax returns help pay off debts, restore savings, and reach personal financial goals.
In this edition of our Finance 101 series, we will discuss how tax returns work.
The average amount received by taxpayers through direct deposit of tax refund last tax season was approximately $3000. Needless to say, for many people, it is the plumpest check they receive all year! It’s no wonder we keep hearing the question, “how long does it take for a tax refund to show in my bank account?” during the tax season, every year.
This article will discuss three main aspects of the tax return process:
- How Long Does it Take for Tax Refunds to Show in Bank Accounts?
- Step by Step Refund Process
- Reasons Why Your Tax Refund Might Get Delayed
Without further ado, let’s get to it!
How Long Does it Take for Tax Refunds to Show in Bank Accounts?
The answer is fairly simple. Out of the several other deciding factors, the most common one is the method you have chosen to file your taxes.
If you’ve e-filed your taxes and chosen to receive your refund directly, which most people do these days, you should be getting your refunds within 21 days of submitting your returns.
In case you've filed your taxes via mail, it takes 6-8 weeks on an average to receive the tax refund.
But the method of tax filing is not the only determining factor that suggests how soon you will get your tax refund. You can choose not to get into this unexciting process of tax filing, websites like FreeTaxUSA, H&R Block, Tax Group Center, LibertyTax, TaxAct, and E-file.com can sort this out for you. In as little as 30 minutes, they help you e-file your federal and state income taxes.
Step by Step Refund Process
If you do choose not to use the incredibly convenient services of the above-mentioned companies, you can go through this process yourself. Here’s how.
Step 1: Check status within 1-2 days after e-filing
Use the IRS – 'Where’s My Refund?' tool to check your status post-e-filing you tax return. If you mail your tax return, it will take at least 4 weeks before you can check your status. Information you require to check your refund status online are – social security number or ITIN, your filing status, and your exact refund amount.
Step 2: Return Received confirmation within 1-2 after e-filing
Once the IRS starts processing your tax refund, the ‘Where’s My Refund?’ tool will show ‘Return Received’. However, you can not see a tax refund date until the agency finishes processing your tax return entirely and approves your tax refund.
Step 3: ‘Return Received’ to ‘Refund Approved’
Upon confirmation of your tax refund approval by the agency, the status in the ‘Where’s My Refund?’ tool will change to ‘Refund Approved’ from the earlier ‘Return Received’.
Step 4: Refund Date confirmation
90% of the time the IRS issues a refund date within 21 days of acceptance if you e-file your tax return. If you mail your tax return though, the process gets a little lengthier. It takes a few more hours to get the refund date even after the status changed to ‘Refund Approved’.
Step 5: Refund Sent Notice
The status shows ‘Refund Sent’ only when the IRS has already deposited the tax refund amount to your bank account. It generally takes 1-5 working days for the bank to reflect the same in your account. Again, if you’ve opted for a refund via mail, the check takes a few weeks to reach you.
Reasons Why Your Tax Refund Might Get Delayed
1. Errors in your tax return
The most common reason why your tax refund might be delayed is an error in your tax return. While filling out returns, you should be extra careful. Small discrepancies like spelling errors in names, wrong social security numbers, or choosing wrong filing status, often cause major delays. Normally, you will receive a call from the IRS asking for the correct info in case of such errors.
To avoid such errors, LibertyTax can come to your rescue. It offers an easy-to-use, browser-based tax filing system that reduces the chances of error to near zero percent.
Many people make mistakes in math. Particularly if you are filling out your returns on your own without any professional help, you’ve got to be very accurate with your calculations. The process of tax filing is rather tedious. We suggest you can go with TaxAct. They are the acclaimed leader of the industry. Honestly speaking, they help you cut down your tax filing stress to zero, ensure smooth tax filing, and thus smoother refunds.
2. Wrong direct deposit info
To skip delays, in the refund process, the direct deposit account should either be in your name, or your spouse’s name, or it needs to be a joint account shared by both of you. Make sure to give the correct account number and routing number. If any error exists in this info, the refund process can get delayed by several weeks. It will take at least as much time as the IRS needs to get to the error, fix it by calling you, and then to send you the refund.
3. Incomplete tax return
Missing info is a very common cause behind tax returns, taking more than usual time in processing, and thus refunds getting delayed. As per the IRS agents, failure in filling out the right info such as social security numbers of the dependents can hold up the refund process for as long as a few weeks. In the case of paper returns, not including copies of W-2 or 1099 forms further delays the processing times, as do missing blanks.
When you use TaxSlayer, they check for all common errors before submission. They make the entire procedure feel like a breeze.
4. Filing a paper return
Apart from the delays caused by the mailing partner in delivering your tax returns to the IRS, it also takes longer for the data to be copied in the computer manually. It usually takes IRS double time on an average to estimate refunds for a paper return when compared to an e-filing.
Note: Some situations require you to file a paper tax return. Cases where you request for adoption credit or file a multiple support agreement, you are not eligible for e-filing. Further, some forms or supporting documents like power of attorney, require extra forms that have to be mailed to the IRS even if you e-file.
5. Making amends to your tax return
For instances when you need to make changes to your filed tax return, you are required to prepare an amended return. Amended returns aren’t eligible for e-filing, and must be mailed to the IRS. Moreover, it takes 8 – 12 weeks to process an amendment from the date the IRS receives the return.
Tip: Often, the IRS system fixes minute mathematical errors when it processes a return and adjusts the refund amount accordingly. That’s why it is suggested to wait before you amend your return, considering the long waiting period after you do so.
We hope we have addressed all your tax-related concerns in this article. Happy tax-filing!