The most common reason that the processing of your tax return and/or the payment of your refund is delayed is because you made a simple error. According to the IRS, the most common errors this tax season are the incorrect reporting of the Recovery Rebate Credit (stimulus payment) and the Child Tax Credit.
I have discussed both of these items in detail in earlier articles, but here are some key steps to remember. If you received advance Child Care Credit payments in 2021, then you (and your spouse if applicable) should have received Letter 6419 from the IRS. If you received any of the third stimulus payment of up to $1,400, then you should have received Letter 6475 from the IRS. Both letters will indicate the amount the IRS paid you for these programs.
Another way to verify the amount you were paid would be to access your online IRS.gov account. It’s safe to create and access your account, and in addition to verifying these payments, there is lots of other information you can verify regarding your account. Remember, claiming incorrect tax credit amounts not only delays processing of your tax return, it will also cause your anticipated refund to be adjusted, and most of the time the adjustment will reduce it.
Years ago, the first “common error” for you to avoid was math mistakes. Since hardly anyone fills out a tax return by hand anymore (it’s just too complicated for most taxpayers), the math mistakes are generally avoided. Software also helps you remember credits and deductions you may have forgotten. The next step is filing electronically. Often mistakes are caught in the filing process by the IRS, so instead of allowing the return to be filed, it is rejected, and you receive a notice with the rejection about why the IRS believes the return is incorrect.
An easy mistake is choosing the incorrect filing status. Filing status generally falls into two categories – either you’re married, or you’re not married. In either case, there are other sub-categories that make it a little more complicated. There are several online tools to help you determine the correct filing status.
The IRS added a question for 2021 on Form 1040 and 1040-SR that asks whether, at any time during 2021, a person received, sold, exchanged, or otherwise disposed of any financial interest in any virtual currency (such as Bitcoin). Do not leave this question blank. You should answer either yes or no as appropriate.
Be sure you report all income. Have all your tax documents on hand before you start filling out your tax return. Last year’s return is a good place to start. If it was on your 2020 return, does it apply for 2021? Be sure to include unemployment compensation if you received any in 2021. There was a special law that excluded some or all of unemployment compensation from income in 2020 but that rule doesn’t apply in 2021.
Once the return is complete, before you hit “send” or seal the envelope, double check name, address, birth date and Social Security number entries for accuracy. Also, if you’re requesting your refund be direct deposited, verify bank routing and account numbers. And if you’re mailing the return, which I don’t recommend due to anticipated delays in processing, make sure you’re mailing the return to the correct address.
While these simple steps won’t guarantee that your return will be perfect and won’t have any processing delays, at least you’ve covered the main items that delay most returns being processed. If you file electronically, and you’re anticipating a refund, you should have your refund in about three weeks. You can check the status online for both federal and state refunds. If processing is delayed, there will be a note on the refund page giving you some information.
Generally, processing delays can take months to resolve. Normally the IRS recommends that you wait at least 12 weeks before contacting them. If your refund is delayed, the best thing to do is create an online account to see if you can get more information on why the delay is happening. If you need more information on setting up an online account, email info@fawandassociates.com and we’ll send you an information sheet we created to assist you.