Each year, the majority of people who file a tax return end up being due a refund from the IRS. And once you file your taxes, you'll no doubt want that money back quickly. But in some cases, you could end up waiting a lot longer than expected to get that refund. Here are some of the reasons.
1. You filed on paper
The IRS typically issues refunds for electronically filed tax returns within three weeks. For paper returns, the turnaround is generally twice as long. That's why it pays to submit an electronic return, and that especially holds true this year.
As of December 2020, the IRS was still sitting on 1 million unprocessed returns for the 2019 tax year. Since paper returns need to be manually processed, staffing issues during the pandemic could cause additional delays this year, but filing electronically can help you avoid having to wait longer for your refund.
2. You didn't sign up for direct deposit
When you file your taxes, the IRS will allow you to sign up for direct deposit. Do it. If you go that route, your refund will be sent to your bank account once your return is processed so you don't have to wait for a check to arrive in the mail. But if you request a paper check, it could get lost in the mail.
3. You signed up with the wrong bank account details
Though signing up for direct deposit is a smart idea, it only works if you enter your bank account details correctly. A mistake with your account or routing number could cause a refund delay. If you realize your mistake early on, you may be able to contact the IRS at 1-800-829-1040 before your refund is processed and attempt to update your information. Otherwise, what will generally happen is that the bank that gets your money will reject that payment, and once the IRS gets it back, it will issue you a check. But either way, you're looking at a delay.
4. Your return contained an error
Errors on your tax return could cause the IRS to reject it, thereby delaying the refund associated with it. Often, the IRS will attempt to correct mistakes rather than reject returns. But while the agency routinely fixes math errors, there are some mistakes it can't correct, like missing information.
5. You claimed a credit that's held up your refund
Tax credits can score you a pretty sizable refund, but thanks to the PATH Act (for Protecting Americans from Tax Hikes), filers who claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) will see their refunds held up until at least March this year. (Note that the IRS delayed the start of the 2021 tax-filing season to Feb. 12 this year, whereas it usually starts accepting returns in late January. In previous years, refunds held up under the PATH Act were released in February.)
These credits in particular are associated with high levels of fraud, so if you claim either one, the IRS will have to hang on to your whole refund for a bit longer -- not just the portion associated with one of these credits.
Stay informed, but don't panic
When your tax refund is delayed, it's easy to panic and assume you're getting audited. But that's not always the case. Sometimes, the IRS just needs a little extra time to process your refund, so do your best to sit tight while you wait on that money.
At the same time, you can (and should) stay on top of your refund by using the IRS's Where My Refund tool. That way, you'll get an update on where your money stands, and you'll know to dig deeper if something doesn't look right.