Income Tax Refunds

Income Tax Refunds

Hurray! Finding out that you qualify for a tax refund can sometimes be the best day of the year. Here are some essential things that you need to know about your tax refund.

When You Don't Get a Check

If you have any outstanding debts to the federal government which the IRS can attach your tax refund to, it will. I.E., if you still owe on taxes from 2008, do not expect to get a 2009 refund. Your refund will be reduced by the amount of your outstanding debt. Debts that the IRS can attach your income tax refund to include: past due income taxes, past due student loans, state income taxes, and child support. If your income tax return is taking a long time in getting here, double-check to make sure that it has not been mandatorily applied to outstanding child support payments or a past federal student loan.

As long as you have not filed a Form 1040EZ, you can opt to have your tax refund applied to next year's estimated tax payments. There are a few isolated situations in which this is a good idea. One of these would be if you expect to pay a lot more taxes in the coming year and you (or your spouse) is not good at managing money long-term.

When You Do Get a Check

If you are one of the many individuals in a tearing hurry for their income tax refund to arrive, the fastest way to receive it is to file electronically. When you e-file, you generally receive your tax refund in half the time as the paper filing method.

You can choose to receive you tax refund via a check in the mail or by direct deposit. Choosing direct deposit is another way to reduce the amount of time required for your refund to get to you. If you do choose to receive your refund via direct deposit, you will need to provide your bank account number and bank routing information with your income tax return, as the IRS needs both to implement direct deposit of your refund.

If you truly do not have time to wait for your refund to arrive (i.e., Blackjack Freddy is going to have his goons break your knees if you don't pay him) many paid tax preparation firm will offer loans against your income tax refunds. Referred to as Refund Anticipation Loans, firms will offer these because, after going over your taxes, they know exactly how much money you will be getting, and they know Uncle Sam is good for it. Obviously, you need the proper documentation to receive these loans, and will need to repay them immediately upon receipt of your income tax refund.

If you have opted to receive your tax refund by check, verify that it is the correct amount as calculated on your income tax return and cash the check immediately. Don't hang on to it for a rainy day. Even if you don't lose it, the IRS will cancel your refund check if it is not cashed within 12 months of receiving it, and your refund will be returned to the IRS.

When Your Check is Wrong

If the tax refund check you receive is not for the same amount calculated on your 2009 tax return, first check to see if you have any of the outstanding debts that may have allowed the IRS to attach a portion of your refund to them. If you do not, to the best of your knowledge, have any of these outstanding debts, and the amount is still different, do NOT cash the check. Call the IRS and report the discrepancy.

Article written by: Letty G.

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