Five Reasons Why Your Tax Return Might Be Delayed

Plus, what you can do in filing to avoid this from happening.

filling out tax from on desk
Photo: Pra-chid / Getty Images

When you're expecting a tax refund, the last thing you want to do is hear the word "delayed." Luckily, the turnaround time for tax return processing has sped up tremendously over the years, especially since the introduction of the Internal Revenue Service (IRS) electronic filing, or e-file, system. Most returns today are processed within three weeks, with many people receiving their funds even sooner.

So, why might your tax return be delayed? Ahead, we asked Colleen McCreary, chief people officer at Credit Karma, for the main reasons.

Your Return Needs an Amendment

The best way to avoid a delay? It's being thorough in your filing process. Otherwise, the IRS may need to follow up with you for information pertaining to your filing or even an error found in your filing. After all, mistakes when filing your taxes is the primary reason why your tax return is often delayed.

You Filed Too Early or Too Late

Timing makes a difference in the processing of your tax returns, too: File too early and you may not anticipate systemic changes. Changes to the tax code or procedures often happen at the last minute and your refund can be delayed in the midst of these updates. These delays are usually minimal, but can be avoided by waiting until the second or third week of the year.

File too late and it delays your return due to the sheer number of people filing all at once. Last-minute filing also increases the likelihood that you'll fall victim to identity theft, which happens when a person uses your social security number to file a fraudulent return and claim a refund. If this occurs, it can take upwards of several months to correct the fraudulent return.

You Claimed Certain Credits

The more complicated your claim, the longer the process, so while tax credits reduce your liability, claiming some credits can slow down the processing of your return and cause a delay. For instance, if you claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC), the IRS is required by law to review your return to verify your income, dependents, and other relevant information. In the year 2021, you won't be issued a refund before March if you claimed either of these credits.

Unpaid Debts or Taxes

Outstanding debts—think: unpaid child support, federal student loans, or state income tax—can cause the Bureau of the Fiscal Service (BFS) to reduce or even withhold your refund. You will be notified.

You Filed a Paper Tax Return

This is brings us to McCreary's best advice: Have your refund direct deposited to your bank account. It's quicker and lessens the chance of your check being lost or delayed in the mail. "E-filed returns tend to get faster refunds than paper returns mailed to the IRS," says McCreary. "So if you want your refund as soon as possible, e-filing an accurate return is probably the way to go." You can, in turn, then contribute those funds to the pursuit of financial goals and even jumpstart your savings for automated wealth.

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