Whether you understand enough about tax law to prepare your own tax return or you called in a pro to file your taxes, you probably believe your tax return was correct. But what if your refund is much less than you expected it to be? Why would this happen? How would you get the details? What can you do to fix the problem?
Why didn’t I receive my expected tax refund?
Your refund can be held back for a variety of reasons, and the offset may be due to your tax issues or the tax issues of your spouse.
Your refund could be held back if:
• You claimed a refundable tax credit that the IRS Criminal Investigation Division is examining in more depth. That part of the refund may be delayed by a couple of weeks.
• You owe the IRS money for a prior year.
• You owe money to a state.
• You have unemployment compensation that needs to be repaid.
• You owe money to the Social Security Administration.
• You owe money on a student loan.
• You owe child support or spousal support and a state agency filed a lien against your tax refunds.
There may be other offsets, depending on arrangements between the IRS and contracting agencies.
Your state may also withhold your refund if you have excessive traffic tickets, parking tickets, or other such fines.
How can I get more information?
How do you find out the details of the reduction? You should get a letter from the IRS or your state within a couple of days. If you don’t receive this letter, check the IRS “Where’s my Refund” system. For further assistance, you can also call the IRS at 800-829-1040.
You can find information about your state refund on the website of your state’s tax agency.
Suppose your refund is held back because you owe an IRS or state balance—and you didn’t know about it. Ask for a printout of your records for the year—or years—in question. You can also get a free transcript of your tax return from the IRS using Form 4506-T. Be sure to check every box in question 6.
Check with your state to see if it has a similar request form.
What if it’s not an IRS or state debt that is causing your issues but rather a problem with another party that has put a lien on your refund? Request more detail from the IRS about the source of the debt. Once you know which agency has filed the balance due, go back to that agency to clear it up and prove that your debts are paid off.
What can I do to fix the problem?
If you’re not current on your dues and the debts are legitimate, you have some serious work to do. Keep in mind that it’s unlikely you’ll get your refund money back from the IRS or other agencies that have placed liens on your refund. If you owe money, the agencies you owe will keep the funds. The good news is that refund will reduce the balance you owe to those parties. And you can avoid having future liens placed on your refund by other agencies by contacting those agencies and setting up payment plans.
However, you might get funds back if the debt owed is your spouse’s. File an Injured Spouse form or Innocent Spouse form to get your share of the refund. Expect to appeal the IRS’ decision; it will generally turn you down the first time.
To prevent the IRS from tapping into future refunds, avoid getting refunds altogether. Reduce your withholding so you get your money from your paycheck instead storing it in the Bank of the IRS.
Eva Rosenberg, EA is the publisher of TaxMama.com, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.