If you're like most Americans, receiving your tax refund is important—maybe even critically important—to your financial well-being. Internal Revenue Service (IRS) statistics indicate that the average federal tax refund was roughly $2,879 in 2021, but any number of taxpayer mistakes can delay that refund for an extended period of time or perhaps even permanently.
Some mistakes can mean that you'll end up owing the IRS money instead of receiving a refund.
Taking your time with your 1040 tax return and knowing what you should look out for when you're filing it can help you avoid delays and penalties.
Be Sure to File on Time
Tax Day is normally April 15, but it can change from year to year due to national emergencies. You can ask for an extension in any year if you need more time to file. Simply submit Form 4868 to the IRS instead of your tax return on or before the spring deadline. That gives you an additional six months until October 15.
Plan Ahead for Paying IRS Debt
You should settle the debt as soon as possible if you owe the IRS money. The penalty for failing to pay any taxes you might owe is 0.5% per month of the amount of your tax debt, not to exceed 25% of your tax debt overall.
You have a couple of options if you simply can't pay your entire tax bill by the filing deadline. Pay as much as you can when you file your return to minimize any penalties. Then consider these strategies when you've paid as much as you can upfront:
- Pay your taxes with a credit card or by taking a personal loan.
- Ask the IRS for a monthly payment plan called an "installment agreement." You can set up a payment plan to reduce the financial consequences if you don't think you can pay off your balance within a few months.
No matter your strategy or when you plan to file, you should prepare a rough draft of your tax return as soon as possible. That will provide you with an idea of how much you owe.
Even if you file for an extension until October, it applies only to filing your return. It doesn't delay your payment due date.
Double-Check Your Math
Double-check your math and your other tax return information as well if you're preparing your tax return yourself, including Social Security numbers. Entering erroneous information will delay your refund until the IRS straightens the situation out and determines how much of a refund you have coming to you—or how much you'll owe.
Claiming tax deductions or credits that you don't actually qualify for, even though you might think you do, can also delay your refund. It's usually a good idea to check with a professional before you claim them, just to be sure you qualify, if you're preparing your return yourself.
You can spare yourself a great deal of aggravation by purchasing tax preparation software. Most of these programs will walk you through your tax situation step by step, breaking down each scenario into simple questions. Enter your answers and other information into the program, and the software will prepare your return and e-file it for you.
If You Ask for Help
You must fill out the "Third-Party Designee" section on your tax return if you enlist someone's help to prepare your tax return, and you want that individual to be able to discuss your tax return with the IRS on your behalf. Your tax professional can talk with the IRS about any questions or concerns the agency might have about your return when you do that.
Third-party designations expire one year from the due date of your tax return. You'll have to fill out a new "Third-Party Designee" form if you want to use someone's help again next year,
If the person who helped you with your return was a tax professional, and you paid them, they must also fill out the section of your return that asks for their identifying information. They must sign and date your return with you and provide their Social Security or taxpayer ID number to the IRS.
Friends, relatives, and volunteers don't have to complete this section or provide this information unless you pay them to help you.
Be Sure to Sign Everything
Surprisingly, a lot of people forget to sign their tax returns, which is imperative. You're required to sign your return, because your signature indicates that you're declaring, under penalty of perjury, that the information contained in it is true and accurate.
You can't cross out the perjury statement just above the signature line. Your tax return won't be processed if you refuse to sign or otherwise tamper with the perjury statement.
You must also enter a date on your tax return. It should be the day you actually sign it. Telling the IRS your occupation and telephone number is optional, however.
Staple Your Tax Return Properly
Staple one copy of each of your W-2 statements to the front of your tax return if you're mailing in a paper copy. Sort them from lowest to highest by using the attachment sequence number if you must file other schedules and statements with your return. You can find this number in the upper right corner of the form.
Mail everything to the correct IRS service center when it's stapled together. The service center will depend on a variety of factors, such as your state of residence and whether you're also submitting a payment. The IRS provides a list of its mailing addresses on its website.
Of course, you can skip all this if you e-file your return instead. The IRS also provides a list of e-filing options online.
Increase Your Tax Withholding
Consider increasing your income tax withholding if it turns out that you owe the IRS money when you complete your return. That won't fix your situation for the current year, but it can help you avoid having the same problem next year.
Fill out a new Form W-4 to increase your withholding and give it to your employer. You can increase your quarterly estimated tax payments if you're self-employed.
Some Tax Credits Will Delay Your Refund
Your refund might be slightly delayed if you claim the earned income tax credit or the additional child tax credit, even if you do everything right. The Protecting Americans from Tax Hikes (PATH) Act prohibits the IRS from issuing these refunds before mid-February. The idea is to give the IRS time to ensure that all claims for these refundable tax credits are legitimate—another good reason to double-check and ensure that you qualify.
Your refund will be delayed until at least February if you file your return before then.
The American Rescue Plan (ARP) temporarily expanded eligibility for the Earned Income Tax Credit in 2021. This includes more childless households as well as taxpayers under age 25 and over age 65. You may find that you qualify for the EITC in 2021 even if you didn't in previous years. The ARP also increased the benefit that most households will receive from the Child Tax Credit, particularly low-income households.
Frequently Asked Questions (FAQs)
How do you amend a tax return?
If you make a mistake on your initial return, you can update your return with Form 1040-X. You have up to three years to correct a mistake or otherwise update a prior year's return. The three-year clock usually starts ticking when you initially file your returns. If you filed for an extension or weren't able to pay your tax bill when you filed, then that could complicate your window to amend your returns.
How do you track your tax return?
The IRS has an online tool for tracking your tax return status. You should check on your return's status if you haven't received a refund within 21 days of e-filing. If you mailed in your return, allow extra time for the return to travel to the IRS.