Ah, tax season is here again, that one time of year that everyone loves to hate. If you have already paid your taxes, then congrats, you are in the clear and do not have to do anything. If you are like many others and still haven’t paid, then you might be putting them off.
One of the most important questions when it’s tax time is: When will I get my tax refund?Taxpayers in the US anticipate this check every year, and many people probably have plans on what to buy with their refund.
The IRS opens the 2022 tax season on January 25, 2023. This is the latest that the tax season has opened in a while, mostly because of difficulties in the economy last year, changing laws, and processing stimulus checks. Thankfully, the IRS has stepped into the 21st century and you can now Efile for your federal taxes. You can also still mail a paper copy of your tax returns as well.
The deadline for filing your 2022 taxes this year is April 18, 2023. Again, this is later than most years. Like last year, the IRS extended the normal tax deadline from April 15 to give people a chance to account for their finances after the last year of economic uncertainty.
When Will I Get My Refund Check?
In the past, the IRS has generally been speedy about processing returns and giving out refunds. For 9 out of 10 filers, the IRS will give their refund within 21 days of filing taxes. The money can get to your faster depending on if you opt for a direct deposit or for being mailed a paper check. You are legally allowed to mail your tax returns as early as January 1st but please note that physically mailing your tax return will increase processing times dramatically, by as much as 6 weeks.
The IRS tends to send out refunds on a schedule, based on the method in which you file your taxes and in which you choose to receive your refund. Here is an estimated schedule
- E-file and direct deposit – 1-3 weeks
- E-file and paper check – 1 month
- Mail and direct deposit – 3 weeks
- Mail and paper check – 2+ months
Notice that the IRS is able to process your return and refund much quicker if your file electronically and provide direct deposit info for your bank account.
Will Coronavirus Impact My Refund Schedule?
Last year, the IRS moved the tax filing deadline to July and many people say delays in filing their returns and getting refunds due to the pandemic. The tax deadline is not set to move yet, but it is likely that the pandemic will cause some delays in processing returns and issuing refunds. Quarantining for IRS staff and working from home may extend the time it takes to process your refund. Further, the IRS might need extra time to process the latest round of stimulus checks that went out in January-March earlier this year.
If you opt for a paper check by mail, then you might experience delays with receiving your refund. The IRS sends out refund checks using the USPS so recent shortages and delays in USPS services could result in delayed refund payments.
As such, we would highly recommend filing your taxes if possible. That way, the IRS can process your returns faster and get your refund payment to you quicker. If you have already filed your 2022 tax return and are waiting on your refund, then you might experience delays in getting your return.
What If I File Early?
Even if you file early, you will most likely see a delay in getting your return. Congress recently passed a law that requires the IRS to hold tax refunds until February 15 if they contain Additional Child Tax Credit (ACTC) or the Earned Income Tax Credit (EITC), even if the return was filed before that date. So even if you file on the very first day that tax season opens, you will probably still see a delay in getting your return.
Typically, when you file your return, the IRS will give updates with direct deposit dates. However, we expect these dates to be slightly delayed compared to last year. If you already filed before the February 15 deadline, then you likely have received your refund already, unless you physically mailed your tax returns and opted to receive a paper check in the mail.
How to Check My Refund Status
If you are currently waiting for your refund, you can check its status using the IRS’s Get Refund Status tool. Enter your social security number and the site will tell you the current status of your return and refund. Please keep in mind that if you enter the wrong social security number, your account might be locked and your return held for identity verification.
If you have a problem when using the tool and get an error code, you’ll need to check what those error codes mean, and what problems they indicate.
What Should I Do With My Refund?
According to data from the IRS, the average tax refund for 2022 so far has been $2,873. So, what can you do with that extra $3k? Here are some ideas.
Make an Emergency Fund
If you don’t already have one, you should put that money into an emergency savings fund. Experts recommend that you have at least 3-6 month’s worth of cash reserve that you can access immediately. An emergency savings fund can act as a cushion in case you lose your job, have to repair your car or need to make some other unexpected large purchase.
Pay Off Debt
If you have high-interest debt, we would recommend putting some of that refund to paying it off. It would not make much sense for you to stick your refund in a savings account that gets 0.5% interest if you have credit card debt with a monthly 12% interest rate. High-interest debt should take priority because the longer you put it off, the more you will have to pay overall.
High-Yield Savings Account
If you have your emergency fund set up and any high-interest debts paid off, consider stashing that refund in a high-yield savings account. Some CD accounts or Money Market Accounts can get interest rates as high as 1%-2% annually. Keep in mind that most kinds of high-interest savings accounts have restrictions on when you can access the money.
Put it To College
If you have children, the extra $3k can help fund their college education down the road. You can consider opening a 529 plan to help your child pay for their education. Getting a college degree is expensive nowadays so getting a head start on a college fund will greatly benefit your kids or grandkids down the road. You can also use the money for your own schooling if you are pursuing a degree.
Invest
The only time that is better to invest than today is yesterday, and $3k can serve as a good amount of seed money for an investment account. You can open a brokerage account with one of the many online brokerage platforms and invest money and build your wealth the way to see fit. You can stash that $3k in an index fund so it will track the market and not be exposed to much risk.
Jumpstart a Business
Here is an interesting fact: according to the US Small Business Administration, the average cost to start a business from home is around $2,000-$5,000. A $3k tax refund can serve as seed money to kickstart your own business and change your career. Several people have managed to build successful companies with a small initial investment and a lot of work.
House Payments
If you are trying to buy a house, then the extra money from your tax refund can go to your down payment or mortgage payments. Making a larger down payment or reducing your principal will mean you have to pay less money over time for your home.
Tax Refund FAQ
When will I get my tax refund?
The IRS reports that 90% of people receive their refund within 21 days of filing their return.
Will my tax refund be delayed by coronavirus?
Yes, it is likely that coronavirus and legislative responses to it will cause delays in tax refunds this year. However, if you eFile and do not have a complicated tax file, then you should get your return relatively quickly. Those who send returns by mail should expect significant delays.
How can I check the status of my refund?
You can check the status of your refund using the IRS Get Refund Status tool.
When is the tax deadline?
The deadline for filing your taxes this year is April 18, 2023
Conclusions
Taxes are almost due so it’s in your best interest to take care of them as quickly as possible. The sooner you handle your returns, the faster you get your refund, and the faster you can put that money toward something important. You can file your taxes using free software online or you can talk to a qualified tax professional.
