For tens of millions of Americans, the reward for enduring the agony of preparing tax returns is the refund check they get from the IRS. Yet many people never get tax refunds, and even some who expect to get them don't always receive their money as quickly as they want. With many different reasons why you might not have gotten a tax refund, what you'll need to do to remedy the situation depends on your particular situation.
1. You didn't have enough money withheld from your paycheck.
When you start a job, one of the first things you'll typically have to do is to fill out IRS Form W-4. This form tells your employer how much money to withhold from your paychecks to cover your federal income tax liability.
The form itself doesn't tell you how much you'll have withheld, but the general rule is that the more withholding allowances you claim, the less money your employer will take out of your check. Claiming more withholding allowances will boost the amount of each paycheck, but it will also result in your having less total tax withheld. As a result, when you file your tax return, you'll have less withholding to offset your tax bill, and you will see either a smaller refund or an actual amount due when you file your return.
Conversely, if you want a larger refund, you can voluntarily claim fewer withholding allowances or have a specific amount of additional money taken out of each paycheck. Doing so essentially gives the IRS an interest-free loan, but many people still like getting a bigger refund more than they miss having the extra money throughout the year.
2. You didn't take advantage of all the tax breaks you could get.
Many people get intimidated by all the tax laws that apply to individual taxpayers. But even though it takes a lot of effort to find some of them, using tax breaks to your advantage can add thousands of extra dollars to your refund.
Some of the most popular tax breaks include the earned income tax credit, the child tax credit, and itemized deductions for items like state and local taxes and mortgage interest. Yet many people don't claim everything they're entitled to receive. For instance, an estimated one in five people who are eligible for the earned income tax credit don't claim it, leaving as much as $6,250 on the table. To maximize the size of your refund, you need to do your research and then follow through to get the money back from the IRS that you deserve.
3. Your financial situation changed.
If you had an unusual year financially, then it can change the amount of your tax refund. The most common situation involves changes in income from sources other than employment, such as investment gains or retirement account withdrawals.
For example, say you sold an investment at a profit. You'll end up owing tax on the amount of capital gains you earned, but that tax won't automatically get accounted for in what you have withheld from your paycheck. The result is that your refund will shrink by the amount of extra capital gains tax you owe from the sale. Similar results can occur from interest and dividend income, self-employment income, and other unexpected windfalls. To avoid getting surprised by this, you need to think about the tax impact of such transactions when they happen rather than waiting until tax time to consider the ramifications.
4. You filed late in the tax season with a paper return.
Even if you expect a tax refund, there are reasons you might not have it yet. Those who filed electronically generally get their refunds within 21 days, but those who file paper returns can end up waiting a lot longer.
If you filed more than four weeks ago, then go to the IRS website and find the Where's My Refund tool. There, you'll get information on whether the IRS has processed your return and when you can expect a check in the mail -- or an amount direct-deposited into your bank account.
As you can see, there are many reasons why you might not get a tax refund in any given year. By looking more closely at your particular situation, you can figure out the exact reason that applies and take steps to fix it going forward.