Income Tax Refund V/S Owning tax

Income Tax Refund V/S Owning tax

Income Tax Refund V/S Owning tax

In these challenging times of financial distress caused due to the pandemic COVID-19, receipt of your tax refund is like a gift. If you are receiving a substantial amount as your tax return you can use it for various useful purposes during these difficult times. However, if you have still not received your tax refund and are wondering what could be the reason; it’s time to analyze the possibility i.e. the IRS seized your tax refund.

You might also wonder that “would you obtain your tax refund if you owe tax to the IRS?” So, let us understand the various aspects related to the scenario in which you apprehend the receipt of your tax

When will the IRS seize your tax refund?

If you owe taxes to the IRS, then you would not be able to get back your tax refund. The IRS has the power to garnish your refund to offset the tax debts you owe. Some of the major tax debts which can lead to the IRS’s seizure of your tax refunds are listed below.

a.Back Taxes

You are said to have back taxes when you have any taxes unpaid or partially paid at federal, state, or local level. If you have tax debts at any of these levels, then your tax refunds might be garnished by the IRS. In such cases, the IRS would send you warning notice about a part of the entire of your tax refund being used to offset your back taxes. Even if you have selected for options like the IRS installment agreement plan, the IRS can still take your tax refund back and pay your tax debts by using them.

If you are willing to relieve yourself from the tax debts, you can do so by filing for bankruptcy. If you are filing for bankruptcy, the IRS would provide you with three payment priorities.


  • Priority and non-dischargeable unsecured tax debtThese are those debts that cannot be discharged and must be cleared first before any other debt such as trust fund taxes, taxes that are assessable but have not been assessed, etc.
  • Non-priority and non-dischargeable unsecured tax debtThese taxes are not placed on the top priority and they cannot be discharged. These taxes include taxes on fraudulent returns, taxes filed late within two years of the date of filing, etc.
  • Non-priority and dischargeable unsecured tax debtThese taxes are unsecured, are not prioritized, and can be forgiven too.

b.Child and Spousal Support

In case you are a parent who is providing child support, the Child Support Agency of your state will inform the Treasury Department about your child support debt. The Treasury Department will send you a pre-offset notice which informs you about how much debt you owe the working of the offset program and the ways by which you can pay off your child support debts. This same procedure is applicable for spousal support as well for tax debt offset by the IRS.

c.Other additional debts

In addition to the Child and spousal support, back taxes there are some other debts also which can be garnished by the IRs through the seizure of your tax refunds. These can be your Student loan payments or your State Unemployment compensation.

If you have not paid your federally-insured student loans, the IRS can seize your tax refund for the payment of your outstanding debts related to a Student loan. Moreover, the US Education Department has the authority to let your employer garnish up to 15% of your income until all your loan debts are cleared.

The IRS can also seize your tax refunds in case of any unemployment compensation collected by you for which you were not eligible. The Unemployment program of your State can ask the IRS or the Treasury Department to offset your tax refunds.

How can you obtain your complete tax refund?

If you wish to obtain your entire tax refund without your refund being garnished for tax debt settlement, then you must pay your taxes on time and in full amount. In case, you have other debts like student loans or spousal support debt, etc. you can try to pay your debts as much as you can. This will help you in obtaining some more tax refunds.

 If you are facing tax issues, you must sincerely work towards the resolution of these issues by opting for professional assistance. In the year 2018, over 13 million Americans owed more than any amount of $128 billion to the IRS for taxes and penalties. You should try to find out about the various tax issue resolution services such as the Installment Agreement, Stair Step Agreement, Partial Pay Agreement, etc. for resolving your tax problems.


Hence, a tax refund is important for everyone, especially during these financially difficult times. You must file your tax returns on time and pay your taxes on time. You must accurately file your taxes to make the maximum utilization of your return obtained.

How to track the status of your tax refunds amidst pandemic?

How to track the status of your tax refunds amidst pandemic?

How to track the status of your tax refunds amidst pandemic?

The pandemic COVID-19 has adversely affected the lives and livelihoods of millions of Americans. With huge unemployment and economic crisis throughout the country, many Americans are looking forward to their Federal Tax refunds as a source of obtaining some money. The inquisitiveness among the taxpayers about “Where is my tax refund” is quite natural in such distressful times.

In general, the tax refund processing time is different for the different methods by which the tax refund has been filed.

  1. For those taxpayers who have filed their tax returns electronically with direct deposit, the tax returns are processed within 21 days of acceptance of the e-filing by the IRS.
  2. For those taxpayers who have filed their tax returns through paper, can expect their tax returns to be processed within 6weeks to 8 weeks of receipt of the return by the IRS.

 How can the status of tax return be checked?

The IRS tool “Where’s My Refund?” can be used by taxpayers to access the status of their tax returns.  To login into this IRS tool, there would be the need for three major pieces of information

  1. Social Security Number or Taxpayer Identification Number
  2. Filing Status of the taxpayer
  3. The exact refund amount which the taxpayer would obtain

Moreover, taxpayers can access their tax return status from their mobile phones by using the app IRS2Go.  This app can be downloaded for free on Google Play, Amazon, etc. and can be used to check tax refund status, make a tax payment, or obtain any free tax assistance if needed.

When can taxpayers start checking their refund status?


Taxpayers can start checking the status of their tax returns within 24 hours after their tax return which has been filed electronically is received by the IRS.

In case the taxpayer had filed tax returns by paper medium, then his status would take around 4 weeks to reflect in the IRS system. So, the taxpayer should wait for 4 weeks before checking the status of his tax refund.

Information available on “Where’s My Refund” tool 

On the IRS tool “Where’s My Refund”, once the details are entered by the taxpayer, the screen would show up any of these three statuses.

a. Return Received

This would mean that the tax return has been received by the IRS and is being processed.  The taxpayer needs to wait for at least 21 days within which he would be receiving his tax returns.

b.Return Approved

 When the tax return status says “Return Approved” it means that the return request has been processed by the IRS and has been approved as well. This status is usually seen after three weeks of the “Return Received” status. 

The taxpayers can even see an estimated date by which their refund money would be deposited into their specified bank account. There can be instances in which the taxpayers do not receive their money on the estimated date; the IRS suggests the taxpayers facing such issues to first contact their bank to ensure that there are no problems associated with the account.

c.Refund Sent

When the status says “Refund sent” it means that the IRS has sent your tax refund to your bank account by direct deposit or has sent your check via mail. The date on which the return payment was sent must be mentioned in this tool. 

The taxpayers should keep in mind that even if the refund has been sent by the IRS, your bank would take at least 1-5 business days to deposit the money into your account. Also, if the return has been filed by paper means then the check would reach the taxpayer within several weeks via mail.

In case, the taxpayer owed some money to the IRS because of tax due, Federal Student Loan, or any other cause; then that amount would be reduced from the refund by the IRS. The IRS would inform you about any such deductions made from your refund on this webpage.

Status of Amended Tax Return

In case, amended returns have been filed by a taxpayer they would take up to around three weeks to reflect in the IRS system. Moreover, it would take 16 weeks or more for the processing of Amended tax returns.

Taxpayers can easily track the status of their Amended Tax return by the tool “Where’s My Amended Return” tool.  There are three statuses which can be seen for Amended Tax Return in this tool i.e. 

  1. Received – This means the taxpayer’s amended tax return has been received and is being processed.
  2. Adjusted – The status Adjusted means the IRS made adjustments into the account of the taxpayer.
  3. Completed – This means the tax refund has been processed by the IRS and all necessary information related to this has been mailed to the taxpayer.





Top 5 Tips to build your Retirement Corpus from your Tax Refunds

Top 5 Tips to build your Retirement Corpus from your Tax Refunds

Top 5 Tips to build your Retirement Corpus from your Tax Refunds

Should I start investing for my retirement? When is the right time to start my retirement planning? These are some of the questions that a lot of us ponder over. And in the process of just thinking and not acting, we miss out on some crucial investments.If you have received some tax refunds, instead of spending it away, it is worth investing it for your retirement corpus. Today is the right time for you to start planning for your retirement. Here are some important tips that will help you build your retirement corpus.


This might seem very obvious, yet a lot of taxpayers forget to exercise this option. If your employer offers a traditional 401(K) plan and you have the right eligibility, do not shy away from it. What makes this option interesting is that your investment is pre-tax. In simple words, the amount will be deducted even before any tax is calculated on your income. This allows you to make the most of it and invest more. Some employers offer Roth 401(K), which essentially deducts the amount after taxes have been calculated. Consider the tax bracket that you might retire in and choose a plan accordingly.

Catch-Up Contributions

Since there is a cap on the amount that you can contribute towards 401(K) for a fiscal year, it is recommended to start early with your retirement plans. However, it all changes as soon as you reach 50 years. The restrictions on the amount that you can invest are no more valid, thus you can invest more for your retirement. If you have missed out on some payments in the past, this is the time to do the catch-up.


The IRA or the Individual Retirement Account is another way by which you can invest for your retirement. You can either choose between a traditional IRA or Roth IRA. The Traditional IRA can be beneficial depending on whether you and your spouse have retirement plans in place from your employer. Based on your tax eligibility the contributions can e tax deductible and your funds will grow tax-free until you withdraw the funds. Roth IRA makes for a good choice if you qualify for phased out income limits. The investments are tax free if you reach 59 and a half years.

Match your employer

If you work for an employer that offers 401(K) it might be worth matching their contributions. Your employer can invest as much as 50% of your contributions, up to a maximum of 5% of your salary. Thus, if you are taking home $60,000 a year, you can contribute $3,000 for your 401(K). Your employer will have to contribute another $1,500. You would not want to miss out on this amount.

Automatic savings

Another smart way of ensuring that you save and money on a regular basis for your retirement is to set up automatic monthly contributions. This will save you from putting in efforts on a monthly basis and get your contributions some discipline. You can reach out to your bank to see the available options to invest automatically on a monthly basis towards your retirement funds.

If you have received any funds as income tax refunds, retirement investment is one of the smartest things that you can do with those funds. There are enough options available for you to either enhance your existing contributions or start fresh if you have not already. Individuals who haven’t yet started, you can start today and make the most of the different options available.


Taxable Refunds – It’s Details, Understandings and Taxable or Non-taxable

Taxable Refunds – It’s Details, Understandings and Taxable or Non-taxable

Taxable Refunds – It’s Details, Understandings and Taxable or Non-taxable

Taxable Refunds ,The tax system and all of its mechanisms can be confusing at times and difficult to comprehend for a normal person. But if you put in some effort in understanding the system, it doesn’t seem all that difficult anymore. Of course, there are several aspects of taxes, but we will focus mainly on refunds. When you have paid more taxes than you are liable for, you become eligible for tax refunds, provided you meet all the criterion. Statistics show that about 80% of individuals filing for taxes are eligible for tax refunds in some form or the other. However, the fact that state tax refunds can be taxable, puzzles a lot of the tax payers, who find it in bad taste as they must pay taxes on the refunds that they received.

Understanding State Refunds

Most of us do resent the idea of having to pay taxes on tax refunds, but there is more than what meets the eye. When it comes to taxes, the IRS and the States use the terms Refunds and Overcharge identically. And as you might have guessed by now, overcharge is taxable. Let us take an example where Josh has a $1000 over payment to the state and receives a refund for the same amount. The $1000 is taxable and we will get to the reasons in some time. But if he chooses to pay a piece of the same, let’s say $200 in some charity, the refund now becomes $800. He can use the $200 for tax rebates in the tax filing for the coming year.

The Underpinnings

Here is how it works. When you file your federal tax returns, one of the itemized deductions allowed is the State income tax that you have paid. But here is the thing, you cannot prepare for the state tax returns without going through the federal tax returns. Thus, there are chances that you are not aware of the State taxes that you must pay and IRS asks you to provide a tentative amount for the same. If you have overshot or undershot the amount, you need to address those in the next year tax returns. Before you draw any conclusions, the IRS does help you out in figuring the tentative amount of State income taxes. Keeping the above in mind, let us assume Josh had $2500 to be paid as part of State taxes. But when he filed for the state returns, he finds out that he only owed $1500. Thus the remaining $1000 will act as a tax refund for Josh. To overcome this situation, the IRS allows you to declare the $1000 overpayment as one of your income items.

Taxable or Non-taxable?

The state or local tax refunds are taxable in some cases whereas they are non-taxable in other cases. We will look into both the scenarios now. The most common scenario where you end up not paying any taxes on the refunds is if you do not deduct the same. If you have not itemized your tax refunds as part of the deductions, then the overpayment does not become a part of taxable income for that year. Some people manage to deduct their sales taxes, rather than state tax refunds when it comes to the previous year, thus giving them immunity against taxable refunds.

But if you have itemized the state and local taxes and were able to secure a refund for the previous year, the same amount or overpayment becomes a taxable entity for the current year. Keeping a close eye on the Form 1099-G can help you out in such situations. But even if you do not receive the same, overpayments are taxable.