7 Things You Should Know About Your 2020 Tax Refund

7 Things You Should Know About Your 2020 Tax Refund
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The 2020 tax-filing season is officially underway, with the IRS now accepting 2019 tax returns and the clock thus counting down until April 15.

If you hope to get a tax refund this year — or even if you simply hope to increase your refund check from the IRS next year — here are several things you should know:

1. Electronic filing and direct deposit speed your refund

Filing your tax return electronically and opting to receive your refund via direct deposit into your bank account — rather than, say, via mailed check — is the best way to speed your refund, according to the IRS.

Filing electronically also is the best way to minimize errors, which in themselves can delay your refund. The IRS explains:

“Even though the IRS issues most refunds in less than 21 days, some tax returns require additional review and take longer to process than others. This may be necessary when a return has errors, is incomplete or is affected by identity theft or fraud. The IRS will contact taxpayers by mail when more information is needed to process a return.”

2. Filing early helps keep crooks off your refund

Filing your taxes early on helps keep criminals from exploiting your tax information for their own gain.

As we explain in “Beware These 6 Income Tax Scams,” thieves who get hold of your personal information can then turn around and file a tax return in your name:

“They use your name, address, Social Security number and other personal data to fill out and file a fake tax return in your name. Then, they get a big refund. Meanwhile, the IRS rejects your actual return because the agency thinks you already filed.”

The earlier in the tax-filing season that you file your return, the less time crooks have to pull off such a scheme.

3. Rushing your return can slow your refund

While it’s smart to file your tax return sooner rather than later, there is such a thing as filing too soon.

The IRS advises having all 2019 tax documents, such as your Form W-2, in hand before filing your 2019 return. This will help avoid refund delays as well as the need to file an amended return later. (It can take the IRS up to 16 weeks to process an amended return and issue any associated refund.)

“Taxpayers need their W-2s to file accurate tax returns, as the form shows an employee’s income and taxes withheld for the year,” the IRS explains.

Employers must send copies of a workers’ Forms W-2 and certain Forms 1099-MISC to the IRS by Jan. 31, and taxpayers also should receive their copies of those forms by the end of January.

If you don’t receive your W-2 by late February, the IRS advises contacting your employer: Ask for a copy of the form and make sure your employer has your correct address.

4. Claiming certain tax credits can slow your refund

If you claim the Earned Income Tax Credit or Additional Child Tax Credit, the IRS won’t issue your refund before mid-February. This is required by law and applies to your whole refund, not just the portion from either of those tax credits.

The IRS says it expects that most refunds related to either of those credits will reach taxpayers by the first week of March, assuming taxpayers choose direct deposit and their returns have no other issues.

5. You can check the status of your refund online

Once you’ve filed your return, you can check the status of your refund by using the Where’s My Refund? tool on the IRS website or by using the IRS2Go mobile app.

Generally, refund information will be available via the online tool and mobile app within 24 hours of the IRS acknowledging receipt of an electronically filed tax return, the IRS says.

6. It might be time to adjust your withholding

If you are disappointed by this year’s tax refund — or even worse, if you find that you owe money — you can avoid a similar fate next year by adjusting your withholding now.

Having more money taken out of your paycheck for taxes throughout the year will mean you are less likely to owe money to Uncle Sam at tax time, and more likely to get a refund.

Of course, getting a refund is not necessarily a good thing. As we have pointed out several times before in stories like “8 Foolish and Costly Financial Fouls — and How to Avoid Them,” receiving a refund is like having given an interest-free loan to the government.

That is another reason why adjusting your withholding now is smart.

The IRS recently released a new Tax Withholding Estimator — and is urging everyone to use it to determine whether they should adjust their withholding.

If you use the new estimator and decide to adjust your withholding, the estimator will even help you fill out a new Form W-4 to give your employer.

7. You can make your refund more valuable

Like any windfall, a tax refund could be worth more than its face value — if you put it to use in a way that saves you money or builds your wealth.

For ideas, check out “6 Ways to Use Your Tax Refund to Become Richer.”

Do you expect to get a tax refund this year? Share your hopes — or fears — by commenting below or on our Facebook page.

Chris Kissell contributed to this post.

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