Its tax time which means one of the most frequent questions I’m asked is, when I’m going to get my refund? In fact, just the other day, I received a call from a client who was somewhat panicking because he did not get his refund. I asked him when he filed his return and he said a few days before. I then informed him that even though the IRS does process tax returns much quicker today than they did in the past, it still takes more than a few days to receive your tax refund. In fact, what I generally tell people is that if you file your return electronically, you can anticipate receiving your refund in two to three weeks. On the other hand, if you file your return by paper, it could take up to six to eight weeks. Of course, this assumes that your return was filed accurately without errors. If your return is filed with errors or is incomplete, the time it takes to get your refund can increase substantially.
The IRS has also made it easier to track you refund. In addition to a mobile app that the IRS has, you can actually go to the IRS’ website at www.irs.gov/refund to track your refund. Typically, you can track your refund approximately 24 hours after you e-file your return, or about a month after you file your return by mail. In order to check the status of your return you will need your Social Security Number, your filing status and your exact refund amount. In addition, one of the nice things about the “where’s my refund” feature at the IRS is that if there’s a problem with your refund, they will tell you that as well.
Over the last number of years, the IRS has gotten more efficient at processing your return and sending you your refund. Unfortunately, the State of Michigan is not as efficient as the federal government. That being said, you can check the status of your refund through the Michigan Department of Treasury. On the Michigan Department of Treasury’s website, www.michigan.gov/taxes they have a page entitled “where’s my refund.” To check on the status of your refund through the State, you’ll need your Social Security Number, filing status and adjusted gross income. Typically, you can check the status of your refund through the State two weeks from the date that you received confirmation if you e-filed your return, and about six to eight weeks if you filed your return by mail.
My advice is that if you do not receive your tax refund within the appropriate time, go on the IRS’ website and the State of Michigan’s to check the status of your return. If nothing more, it’s important to determine if you have been a victim of identity theft or fraud. Quite frequently over the last few years, tax refunds have been rejected because of fraudulent returns that had already been filed in the taxpayer’s name. Fortunately, the IRS is very good at resolving these issues; however, the key is to notify them as soon as possible. The State of Michigan is not as good as the IRS at resolving this issue; however, it is still important to notify them as soon as possible.
For those of you who are receiving refunds, there are a couple of things you should consider. First, if you are receiving a large refund it may mean that you’re having too much withheld from your wages, or you’re paying too much in estimates. Either way, you may want to adjust these numbers. After all, if you are receiving a large refund, in reality what it means is that you’re giving the government an interest free loan.
The other issue you should consider when you receive a large refund is what to do with the money. Of course, my general advice is to look for ways to better improve your financial situation. If you have charge card debt, use your refund to pay it down. On the other hand, if you don’t have debt, you should consider investing your tax refund. If you’re eligible for an IRA, consider making a 2019 IRA contribution with your refund. On the other hand, if you don’t have an emergency fund of money, using your tax refund to set up an emergency fund is a great way to use your tax refund. The bottom line: Before you go out and spend your tax refund, look for ways to invest it so that you can improve your overall financial health.
One last note regarding taxes and that is if you are going to get a refund it does pay to file your return sooner than later. However, never forget what’s even more important and that is to file an accurate and a complete return.
Good luck!
Rick is a fee-only financial advisor. If you would like Rick to respond to your questions, please email Rick at rick@bloomassetmanagement.com.