Many people look forward to their tax return refund because it can act as a booster to the regular income. However, the IRS doesn’t always return this to you, and you may not receive your money if you’ve neglected certain types of debt or have under-reported your income. Let’s examine the reasons why you might not have received your excess taxes back and
What Happens to My Tax Return Refund when I Am in Debt?
One of the most common reasons why people don’t receive their money is that they are currently in debt. There are several different types of debt the government can apply your excess taxes to, for example tax debt, child support, state taxes, and even student loans. If you have fallen behind on your payments of any of these, you might not receive anything from the government, and the money will be applied to your debt instead.
While this can be frustrating, it also means that you will be able to pay off your debt faster and free up more money in the future. However, if you believe that your excess taxes should be returned to you and have been taken unfairly, there are several options for you. In certain situations, you may be able to receive your money after all.
Owing the IRS Money
Usually, excess taxes are kept back because you owe money to the IRS already. You may have had trouble paying your tax bill in previous years. Whether you already have a repayment plan set up or not, the IRS can still seize your money and apply it to the balance, a process which is called an administrative offset. That way, your debt will be smaller and hopefully more manageable to pay off.
If you need your excess tax money back and don’t want to risk losing it, the best way to protect it is to be current on your taxes before you file the new return. Before an administrative offset happens, you should be getting warnings and collection attempts, so you’ll be aware that there is an issue. By resolving this before it’s time for your tax return, you can avoid any problems.
Other Types of Debt
There are other reasons why you may not receive any money back. If you owe any child support, state income tax, or are delinquent on your student loans, the IRS can also apply your excess taxes to these types of debt. It’s also important to remember that your money can be applied to your spouse’s debts if you are married. For example, you may not receive anything back if your partner has fallen behind on child support, even if you don’t have any children.
This can be particularly frustrating, especially if you didn’t know about it beforehand. For this reason, it’s best to speak about your financial situation with your partner and find out whether they have any unpaid loans. If so, you may be able to find a solution that doesn’t involve the seizure of your excess taxes.
What to Do
Fortunately, you have options even if the IRS initially doesn’t return your money to you. For example, you can file an Injured Spouse form if your partner is at fault, and you didn’t have any knowledge of the problem. You can do this either right away when you file your tax report or later on, when you receive the notice that an administrative offset will happen.
Military service members can sometimes also receive their excess taxes if they get their tax debt suspended. This can happen when they can’t pay taxes because the circumstances of their service make it challenging. No matter if one of these situations applies to you or not, consulting a professional could be a good idea for you. A tax specialist can help you to find out how to best resolve your situation, so you don’t have to lose out on your excess tax money.
Other Reasons Your Money Might Be Retained
You might not have received your money despite not being aware of any current debt. This could be the case if you didn’t report all of your income and the IRS discovered this, if you didn’t fill out a Form 1099 despite having side income streams, or if your tax return refund is simply delayed due to factors outside your control.
You Didn’t Report all of Your Income
You may owe back taxes because you didn’t report your income correctly in previous years. If the IRS finds out about this, they can keep back a part or all of your money to make up for it. You may also have to face additional charges in such a case, so try to avoid this in the future and always report your income correctly. It could be worth speaking to a professional when faced with this issue because it is often complex to navigate on your own.
You Missed Filling Out Your Form 1099
The Form 1099 is where you have to report income that doesn’t come from your job, for example, any dividend payments or money received when you worked as an independent contractor. You generally need to fill this out if you earned more than $600 in this way. Unlike with your primary form of income, nobody will withhold taxes for you, so you need to budget for them throughout the year, particularly if your income from this source is significant.
A special kind of 1099 is the Form 1099-S, which applies to you if you sell your home. It makes sure that the money you received from the sale is correctly reported, as you may be subject to capital gains taxes. If you didn’t fill this out correctly, the government can retain your excess tax money to make up for it.
They Are Still Processing
The IRS is a large and sometimes slow organization, so you may have to wait for many weeks before your money goes through. When you file electronically, the process should take 21 days, but when you file a paper return, it could take around 42 days, or six weeks. You may have to wait longer if the IRS is holding your money due to a perceived math error, suspected identity theft, ACA health insurance issues, or other problems.
Sometimes, the process can be delayed due to a mistake that has nothing to do with you. For example, your money might be sent to the wrong bank account or because there is a backlog at the IRS. While this is very frustrating for you, there won’t be much you can do except wait for the excess tax to arrive. In every case, it’s important that you stay on top of things and check your status online. This can help you to know what the problem is sooner.
When your tax return refund doesn’t go through, it can be very frustrating for you. In most cases, it will be because you owe back taxes, state taxes, child support, or student loans, but your money can also be withheld for other reasons such as incorrect Form 1099 filing or not reporting all income. Sometimes, the IRS is at fault due to delays and backlogs.
If you’re facing issues with your taxes, the best way to move forward is to get a professional involved. By consulting with tax specialists in your local area, you could avoid further problems and improve your situation much faster. To get started, contact Geaux Tax Resolution in Lafayette, LA. We can help you to turn your situation around with minimal hassle.