Will I get a tax refund? How much?!

Usually, one of the most crucial questions we ask ourselves when tax season is right around the corner: how much will my refund be? Every year we are expected to file our taxes to the IRS. We HOPE to receive a refund, ideally a hefty refund that we can pocket away for ourselves. However, it is up in the air for many people whether they will receive money or owe money to the government in April.

If you are like me, I am sure you have been stressed a time or two trying to decide whether you should hire a tax professional or do it yourself. In that article, I discussed both the pros and cons and presented a few other suggestions you may find beneficial!

In this article, I am focused on breaking down how you can determine if you will receive a refund. As well as explaining some reasons you may not receive a tax refund. It’ll be helpful to know how you may owe the IRS money from previous tax seasons and how to figure that out. Lastly, I’ll recommend some solutions to better prepare you for next year’s tax season. Especially since that is money you had already earned before the government took it away. I’m sure it would be nice to get some of it back and “treat yo self,” as Donna and Tom love to say from Parks & Rec.!

So how do you know if you will receive a refund or not?

The first step is to remember whether or not you filed taxes for the previous year. I will just rip the band-aid off for you and let you know that you will probably owe taxes if you haven’t filed taxes or paid taxes, so do not expect a tax refund. If you have only missed paying taxes once or twice but consecutively paid taxes the previous years, you may still receive a refund. When you file taxes online, you will be able to see if you owe money in red or receive a tax refund in green. 

If you are still reading this, I assume you have either filed your taxes, are planning to file your taxes, or are just curious about refunds. Usually, when you file taxes online, right before you submit your information, you will see the amount being refunded or the amount that is owed. However, if you don’t know that number, then reach out to the company you filed your taxes with or the CPA (certified professional accountant) you worked with. We receive a tax refund because when we file our W-4 form (a form submitted before starting the new job), this form asks how much money we want to be taken out of our checks.

The standard percentages you see in Arizona, for example, range from 0.8% to 5.1%. The tax refund you receive from the IRS means that you overpaid taxes to the government. They are REFUNDING the amount you overpaid. I used to do the Rocky dance with my arms in the air bouncing around in a circle anytime I received a tax refund. I joyfully believe I had received “free money” from the government.

After working a few years in the corporate world, I soon realized that it was all the money I overpaid. I had done nothing special but give extra money to the government. Then, my goal became not owing to the government but not giving them too much either. Everyone’s situation is different, and I cannot show you an exact number that you will receive as a tax refund. However, I have experimented with these three tax refund calculators, and this should give you a general idea as to how much you may receive:

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

https://www.1040.com/tax-estimator

https://smartasset.com/taxes/tax-return-calculator

Generally, once you have filed your taxes either online or with a CPA, the IRS will usually take up to 21 days to return your refund to you. However, if you owe taxes, the IRS will give you up to 120 days to pay back the total amount you owe. If you don’t comply within this timeframe, the IRS will begin to penalize you and tack on a 0.5% penalty fee just to start.

Now let’s say that you have filed your taxes, but STILL, you don’t have your money, and it has been over 3 weeks. You can either call the IRS or go to their website irs.gov/refunds to see where your refund is. There are three things that they will need so you can see your refund status:

• Your social security number or ITIN (individual taxpayer identification number)
• Filing status (single, married, etc.)
• The exact refund amount

This will display the most recent tax form you submitted and tell you what status your refund is currently in. After that, you should know when and how you will be receiving your tax refund from the IRS.

This section will now dive into those who may have slacked on paying their taxes and could be in a position where they owe the IRS. How do you know? Like I said above, the IRS will give you 120 days to pay back the amount you owe, and during that time, you will receive a letter (usually if you don’t pay your tax bill in full by April).

The first letter explains how much you owe, penalties, interest accruing, and the date you must pay everything back by. If you continue to ignore the IRS, they will become more persistent and aggressive with their methods to contact you. The IRS can keep all of your future tax refunds to pay back the taxes you owe. They can also collect portions of your salary from your bank accounts or even send debt collectors to your door while calling you day and night.

I say all this to say that yes, the moment you owe Uncle Sam money, he will let you know by sending letters, notices, and messages about the amount that is owed. If you go years without paying the IRS, you will have received multiple letters about the amount you owe. Typically, the IRS will send out the current year’s tax amount that you owe, so you will most likely need to compile all the letters together to know the total amount.

However, you can always contact the IRS directly to determine the total amount. Or you can go to the IRS tax account portal to see the total amount. Items you will need to have ready are the filing status, the mailing address used on your last tax return, the account number of a credit card or loan in your name, and an email or phone number.  

Solutions!

Don’t start hyperventilating if you fall into the above mentioned situation, I have solutions to help! The sooner you confront this bill, the easier it will be on your bank account in the future. The longer that you wait, the higher the fees and penalties become. Call the IRS and discuss a payment plan. Anything under $100,000 that you owe can qualify for the short-term payment plan, which gives you 6 months to pay.

There are more extended payment plans that you may be eligible for depending on your current income situation and how much you owe. Calling over the phone can quickly resolve this issue. In addition, you can request an offer-in-compromise that allows you to pay the IRS a minor amount than the original amount owed. You will need to qualify for this option by filing an application with the IRS.

You can also research and contact tax attorneys or tax debt professionals to do free consultations and briefly discuss your situation to better grasp the next steps. The best solution is to reach out directly to the IRS and determine how much is owed. Then work out a payment plan that fits your budget so you can at least show that you are cooperating.

This concludes today’s article, and I hope that it was helpful to you and got you thinking more about your taxes. I always want to hear your thoughts and questions, especially on financial literacy. Please email me your questions and leave comments below because I want to know what you think. Check out the website to keep reading more!

And remember, like Earl Nightingale said, “Everything begins with an idea.” See you again next time!