We have experienced a high volume of tax refund questions so we are going to address this topic. But, for those who haven’t filed their tax return yet or received a tax refund, don’t worry, it is still early.
Getting a Big Tax Refund Ain’t That Great
A large tax refund should be a reminder that you gave the IRS a big loan during the year. Let us explain.
Tax Refund Example
For instance, if you claim too few exemptions when you filled your W-4 form and have been receiving a biweekly paycheck of $2,000 when you could be receiving say $2,100 then you have given the IRS $100 every two weeks or $2,400 during the year. The IRS will have to return $2,400 to you after you file your tax return. Think about the savings in interest you lost during the year by having too much money taken out of your paycheck. You could have been paying off credit card bills, allocating money to a 401K, saving up for your child’s tuition & more.
Change Your W4 Form For Next Year
Make sure you don’t repeat the same mistake next year. Instead, contact your employer’s payroll office and update your W4 form. More specifically, review your exemptions. But, make sure you don’t claim too many exemptions as you will owe money back to the IRS at the end of the year which isn’t fun either.
What About Getting My Tax Refund Quicker?
Well, if you are going to be getting a tax refund and are very worried about how quickly you will receive it; your best option is to file taxes online. Generally speaking, you will receive your tax refund in about half the time as paper filing or as fast as 3 weeks after filing your return. This is because everything is processed faster using e-file (i.e. no delays with mail & all of your tax information is sent electronically). But, note that certain state tax refunds may take longer as several states are currently facing budget issues.
Also, keep in mind that you cannot file electronically if you are planning to claim the homebuyer tax credit as there is paper documentation requirements for this credit.
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