3 ways to speed up your tax refund, despite IRS delays
(From CBS News MoneyWatch) While the CBS news item is aimed at consumers, professional tax preparers may want to note these tips to advise their clients.
People who file their tax returns early in order to get their refunds sooner will have to wait a few extra weeks. The IRS announced this week that it won't start processing returns until Jan. 28 at the earliest -- and possibly as late as Feb. 4. The original date for the IRS to begin processing tax returns and refunds was Jan. 21.
According to an IRS statement, the delay is necessary to "allow adequate time to program and test tax processing systems" which could have been worked on during the 17-day shutdown which furloughed IRS workers and other government employees. Acting IRS Commissioner Danny Werfel said the IRS' preparation for tax season is "an intricate, detailed process, and we must take time to get it right." He added that the delay will give it time to "program, test and validate our systems."
Folks who rely on getting their tax refund quickly may need to wait even longer for their money. If there is another shutdown again in January when the government renews budget talks as part of the recent compromise that ended the shutdown, refunds could potentially be delayed further.
If you are frustrated and worried about when you'll get your refund this year, here are three things you can do to get your money back sooner:
No. 1: Underpay your taxes for the remainder of this year
If you typically withhold a large chunk of your income and then get a tax refund, that's not a good thing. What you are doing is overpaying your taxes.
What you should do is immediately file a new Form W-4 with an increased withholding allowance. For example, if you elect a withholding allowance of Married and 1, and you expect to get a $3,000 tax refund for this year, then increase your withholding allowance to Married and 15. Doing this will reduce the taxes withheld for the remainder of this year and quickly increase your take home pay.
If you do this, make sure that in January you review your withholding again and reduce the allowance to 3 or 4 so that you withhold the correct amount for the full year of 2014.
Follow the instructions on the IRS' Withholding Calculator. You'll get a smaller tax refund, but you can use the additional take home pay now to build your cash savings and have less of your money held hostage if there is another government shutdown.
No. 2: E-file your tax return
Another thing you can do to speed up your tax refund is to electronically file your tax return. If you use a tax preparation computer program, the e-filing process is straightforward and easy. The process allows you to electronically "sign" your return using a five-digit self-selected PIN and information from your prior year's return.
The most comforting part of this part of the process is that an electronic notice is generated, including an IRS Document Control Number, or DCN, which provides official proof that the return is filed and accepted by IRS. No more rushing to the post office to mail the forms with a return receipt requested. The benefits of e-filing your tax return are faster refunds, secure processing and acknowledgement from the IRS that your return has been received within 48 hours.
The IRS is encouraging taxpayers to file their taxes electronically because it allows quicker processing of refunds and ensures accurate tax returns. Remember that the delay in processing tax returns applies for all tax filers, regardless of whether they file by paper or electronically.
No. 3: Use direct deposit refund
A final tip: Whether you use a tax preparation and filing program or paper forms, use the option to directly deposit your refund into a bank account. This will also speed up your tax refund. You can even choose to have the refund split among up to three different US financial institutions. Use Form 8888, Allocation of Refund and make sure to provide the correct account and routing numbers on the form.
It's interesting to note that while the IRS has decided to delay the start of tax season (and taxpayers refunds), the government did not even consider delaying the launch of HealthCare.gov, the online health insurance website that launched on Oct. 1 as part of the Affordable Care Act, also known as Obamacare. So many glitches have been reported that Congress is now holding hearings to investigate. Obviously the software was not ready to go live. I'll leave it to our readers to comment as to why the launch was not delayed.
Source: CBS News Moneywatch at http://www.cbsnews.com/8301-505144_162-57609079/3-ways-to-speed-up-your-tax-refund-despite-irs-delays/