What does your tax return reveal about your financial status

What is a tax return

A tax return is one or more forms submitted to a taxing body that include earnings, spending, and other crucial tax data. Tax returns allow taxpayers to determine their tax liability and plan their tax payments. They also allow refunds for any taxes they have paid more than required. Individuals or businesses must file their tax returns annually if they have a reportable income, such as wages, interest, capital gains, or other earnings.

File a federal income tax return

The steps to file a tax return are as follows:

• Collect the documentation: Compile all documents, including A W-2 form from each employment.
• IRS form: Prepare additional income and interest statements (1099 and 1099-INT forms).
• Itemizing your return: you need receipts for business and medical costs and charitable gifts.
• Select your filing status: Your filing status is impacted by how much of your income you allocate to living expenditures and your marital status.
• Choose your tax filing method: For the most accurate returns, the IRS advises using tax preparation software when filing electronically.
• Itemize deduction: Choose whether to itemize your tax return or take the standard tax deduction.
• Payment: pay your taxes and request a payment schedule.
• Submit: You must submit your taxes by April 18, 2023

Refund timing

The IRS processes over 90% of refunds within the typical 21-day window. However, some tax returns will need to be examined more carefully, which might cause the refund to be delayed. 

Several factors may delay the processing and distribution of your tax refund. It can be delayed if you submit your return too soon or wait until the very last minute. Additionally, filing a paper return can cause delays. Online filing is the quickest way to obtain your refund and file your tax return. 

Here are a few most typical reasons for delays:

• The data on your tax return needs to be corrected: The processing of your refund may be slowed down by technical or other problems on your tax return.
• Your return is incomplete: The IRS may analyze your return if it is incomplete, which could prolong the time it takes for your refund to arrive.
• You are a tax scam victim: One kind of tax fraud includes someone filing a false tax return and requesting a refund in your name using your personal information. You can report tax-related identity theft to the IRS and the Federal Trade Commission (FTC) if you believe you are a victim.
• Your return was delivered to the incorrect bank: The quickest way to receive refunds is by online filing your tax return, particularly if you choose direct deposit. Your money could be transferred to someone else’s account if you mistyped a digit in the routing or account number.
• You modified your tax return: A tax return amendment can potentially cause a delay.
• Your refund has been reduced to settle an obligation: The IRS may deduct a portion of your refund if you owe certain debts, such as unpaid federal student loans, state taxes, or child support.

Types of tax refunds

E-file and direct deposit allow you to join the nine out of ten taxpayers who receive their refunds more quickly. You can obtain your federal individual income tax refund in several ways:

• Direct deposit: into your checking/savings account is the quickest method (IRA). For more info, see the instructions for Form # 1040. The IRS restricts the number of direct deposits into a single financial account or debit card to three refunds annually. However, this prevents fraud and identity theft. Taxpayers who go over this cap will get a warning instead, and it might take up to 10 weeks to get their refund cheque.
• Treasury Direct: To purchase savings bonds, deposit into a Treasury Direct online account. Consult the Form 1040 Instructions (and Form 1040-SR) for more details.
• Traditional, Roth, or SEP-IRA: Directly deposit some or all your refund into one of these retirement accounts. A SIMPLE IRA cannot be used in this situation. Before filing your return, you must already have an IRA account with routing and account numbers. For more info, see the instructions for Form 1040 (including Form 1040-SR). Publication 590-A, Donations to Individual Retirement Arrangements (IRAs), has more information on IRA contributions.
• Bonds for Savings: By purchasing up to $5,000 worth of U.S. Series Savings Bond
• A Health Savings Account (HSA).
• An Archer MSA.
• A Coverdell Education Savings Account (ESA).
• By sending a physical check to the address on your tax return

Checking your refund status

You can begin monitoring the progress of your refund within the:

• Twenty-four hours following the e-filing of a tax return for the year 2022.
• 3 or 4 days following the e-filing of a return for the tax year 2020 or 2021.
• At least six months after submitting a paper-return

Ensure you have access to your tax return. You must provide your taxpayer identification number, filing status, and the total refund amount reported on your return. To check the status of your return, you can also download the free mobile app IRS2Go, on an iPhone or an Android smartphone.

Unqualified for refund received

Only cash the check if you receive a return to which you are entitled or for a sum greater than anticipated. If the amount of a direct transfer was higher than expected, call the IRS at 800-829-1040 and your bank or other financial institution immediately. If the IRS sends you a notification outlining a change to a refund amount, you must follow the instructions in the notice.

Unexpectedly low refund

You can cash the check if you get a lesser refund than you thought. You’ll receive a note describing the difference. Observe the advice given on the notice. You will eventually get a payment for the difference if it is found that you should have gotten more.

Refund checks missing

The IRS will launch a refund to determine the refund status if your return check is misplaced, stolen, or destroyed. Moreover, you can check your paystub to keep track of tax returns and refunds.

Refund

For the two prior tax years and the current one, information is provided in “Where’s My Refund” View your online account if you require additional return information. There is a tracker under “Where’s My Refund” that shows development through the following three stages: 

• When the IRS finishes your tax return and approves your refund, it will give you a refund date. 
• Use “Where’s My Amended Return” to find out the status of an amended return. The most precise and comprehensive refund information is accessible here. 
• Refund status is updated once each day, typically in the evening.

Conclusion

As you prepare your taxes this year, be sure to take a look at this comprehensive guideline about tax returns. Your tax return can reveal a lot about your financial status, it can tell you how much money you owe in taxes and if there’re any other financial issues, as well as provide information about your assets and liabilities. By understanding what your tax return reveals, you can make better decisions about your finances.