
Refunds can be a terrific way to pay off high-interest debts. It can also help you build or replenish your emergency savings fund. You can expedite the process and receive your refund sooner by e-filing, ensuring accuracy, and using direct deposit.
Check the Status of Your Refund Online
A refund can be a windfall for your financial health if used wisely. However, it is also a temptation to make spur-of-the-moment spending decisions that may leave you happier now but worse off later. The best way to keep your refund working is to put it into a savings account. That allows it to grow inside an FDIC-insured bank account while you resist the urge to spend it. Whether you are filing electronically or by mail, it’s easy to track your tax refund using an online tool on the IRS website or mobile app. If you are expecting a refund, the first tool will tell you how long it is expected to be before it arrives in your bank account or by mail. The second tool will explain why there is a delay or if your refund has been lost.
While delays are expected this year, there are some steps you can take to ensure the speed of your refund and maximize its impact. For example, you can itemize deductions if your total deductions (such as mortgage interest, charitable donations, and medical bills) exceed the standard deduction. You can also boost your refund by selecting the correct filing status, such as head of household, or by claiming tax credits like education and child care expenses.
Make Sure You Have All Your Information Ready
Using the IRS’s “Where’s My Refund?” tool or a mobile app, you can see the status of your refund within 24 hours after filing electronically. It may take longer for a paper return to be processed. Ensure that all your information is accurate and complete. It can hold up the process if you have to go back and fix minor errors like missing or incorrect numbers. Verifying that you have the correct account and routing numbers for your bank account is a good idea, mainly if you utilize direct deposit. It would help if you remember that the IRS only sometimes sends out full tax refunds. For instance, if you file for a refund and are found to owe money for child support or unpaid student loans, they will apply that amount to your refund. You can learn more about this from the IRS website and its FAQs.
If you expect a sizable refund, it is wise to stash it in a savings account. Use it to pay down high-interest debts or build an emergency fund. Additionally, you can invest it in an IRA or make purchases using cash back from your credit card. You can also put it toward medical expenses using a health savings account or cash back from an online purchase.
Use Direct Deposit
When filing your taxes, choose direct deposit so that your refund is electronically deposited into the account of your choice. This option is much safer than sending a check in the mail and saves taxpayers money. The government pays only a dime for every electronic deposit, but it costs more than $1 to issue a paper refund check. Direct deposit is also more convenient because you can access your money sooner without worrying about losing or misplacing a paper refund check. It is essential to provide accurate bank account information when using this method, as an incorrect account number or routing number can delay your refund or cause it to go to the wrong place. This information is available through your bank website or by calling your bank.
You can also use direct deposit to split your refund, which is a great way to manage your funds and save for the future. Using the IRS’s online tool, you can allocate your refund to up to three accounts or financial institutions and even purchase Series I savings bonds with part of your refund. Remember to put a portion of your refund into an emergency fund. Having this amount of cash stashed away can prevent you from dipping into debt or taking out high-interest payday loans in a crisis.
Keep Track of Your Taxes
Keeping track of your taxes is vital to filing an accurate return and getting all the deductions you are eligible for. Whether you use an app or manual organization methods, keeping receipts and records is the best way to ensure you get all tax-deductible expenses at tax time. For example, if you are using your refund to pay for child care or medical expenses, keep detailed receipts with each person’s name, Taxpayer Identification Number, and the date of service. This documentation will help the IRS verify your credit or deduction eligibility.
The same goes for personal travel, entertainment, and other deductible expenses. Be sure to have a receipt for each purchase and the expense’s business purpose. Some itemized deductions, such as charitable contributions and mortgage interest, also require proof of payment with canceled checks or credit card receipts. Another helpful tip is to open a separate bank account for your business. It can expedite the process by allowing you to categorize and store all your business expenses in one place. Following these simple tips, you can file your taxes efficiently and receive your refund faster.