Stimulus checks aren’t the only cash infusion hitting U.S. households.
On top of those $1,400 direct payments going to most adults, more than 42.5 million tax refunds were issued in the first four weeks of the tax season, which started Feb. 12, according to data released by the IRS on Thursday. The average amount is $2,967, down slightly from $2,973 a year ago.
Given that temporary tax changes have taken effect since many of those refunds went out — including waiving federal taxes on $10,200 in unemployment benefits and forgiving excess health insurance premium tax credits — some households will end up getting an unexpected refund (or a bigger one).
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However, in addition to extending the tax-filing deadline to May 17 from the usual April 15, the IRS is advising taxpayers who already filed to wait for further guidance on recouping any additional amount you are owed.
If you filed your return and are still waiting for your refund, it may or may not be delayed, depending on the specifics of your situation.
Generally, if you e-file, it can take up to 21 days for a refund. However, if you filed a paper return, the IRS has warned there could be a delay.
“We do know that the IRS is still working through mail issues, so if you’re mailing in a return, it will take longer,” said April Walker, lead manager for tax practice & ethics for the American Institute of CPAs.
Your refund also could be delayed if it gets flagged because something on your return doesn’t match the information that the IRS has, Walker said. If that’s the case, you may receive a letter about the discrepancy and, perhaps, additional tax owed.
You can track your refund using a tool on the IRS website.
The top three ways that taxpayers say they would use a refund if they got one? Stash it in a savings account (41%), pay off debt (39%) and pay for necessary household expenses (23%), according to a recent survey from MagnifyMoney.
Meanwhile, getting a refund generally means that, over the course of the year, there was more tax withheld from your paycheck than necessary.
“If you get a tax refund, you overpaid the government and are technically letting them use your money for free,” said Kathryn Hauer, an IRS enrolled agent and a certified financial planner with Wilson David Investment Advisors in Aiken, South Carolina.
In typical years, experts may recommend that, to make use of that money during the year instead of getting a big refund, you can reduce how much income tax you have withheld from your paycheck as part of a tax-planning strategy.
However, Hauer said, all bets are off this year.
“With tax-rule changes, Covid exceptions and three stimulus checks, tax planning rivals gambling in its uncertainty,” Hauer said. “I advise clients that it’s safer to err on the side of caution and set things up so that you get a refund.
“If you underpay your taxes, you could owe penalties, interest and fees,” Hauer said.
