Why Didn't I Get a Tax Refund?

By Markets Fool.com


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It only seems natural that the reward for the hours of effort you put into your tax return should be a nice check from the IRS at the end of tax season. Millions of people get refunds, and it can leave you feeling left out if you weren't among those who got some extra spending cash. However, although there are some situations in which you can work harder to get a tax refund, sometimes the best situation is one in which you don't get a refund at all. Let's look at some of the reasons why you might not have gotten a tax refund this year.

You got your withholding perfect

For most people, the size of a tax refund depends on how much money they have withheld from their paychecks. If you have more taken out than necessary, then you're effectively saving money at the IRS, and you'll get it back at the end of the tax year in the form of your refund. If you get your withholding correct, however, then you won't get a refund at all. Instead, all of your paychecks will be incrementally bigger throughout the year. In effect, you'll have gotten your refund early -- and in such small chunks that you probably won't even have noticed.

Your return is still being processed

Even as the end of May approaches, some people who filed their 2015 tax returns on paper might not have gotten their refunds yet. Electronic returns should have all gone through by now, and so if you arranged to have your refund directly deposited into a bank account, then it's likely that there's a specific problem with your return that you should look into more closely. However, paper returns take longer. Between transit time for your return to get to the IRS, processing time internally for your return, determination of the appropriate refund amount, cutting a physical check, and delivering it to you via mail, it can easily take a month or longer from when you file to when you'll get your refund. Looking at the IRS website to see if your return is on its way is a good strategy to ensure that nothing more troubling has derailed the IRS check you expected.

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You had outstanding taxes or other debts owed

In some cases, the IRS will not send you a refund even if you correctly indicated that you had more money withheld or paid through estimated tax payments than you owed in tax. The federal government has the right to take your tax return to offset certain other debts, including not only past taxes owed from previous years' returns but also other types of debt like federal student loans. Overdue child support or state income tax liabilities are other examples of the sorts of outstanding debt that can end up resulting in having the IRS divert your tax refund to repay.

You had substantial income outside work

One reason why most people get refunds is that the formula that governs how much tax gets withheld from your paycheck tends to come up with a number that's a bit higher than is strictly necessary. However, one thing that can push the balance the other way is if you have a lot of income from sources other than work, such as investment income or distributions from tax-deferred accounts like IRAs.

There's a way to account for that sort of income on the Form W-4 that you file with your employer to arrange for proper tax withholding, but most people don't go to the trouble of updating that form on a regular basis. As a result, most people who have substantial income from other sources end up having too little withheld and therefore never get a tax refund.

Everybody likes getting a nice check in the mail or a wad of cash added to their bank account. But if you didn't get a tax refund this year, it doesn't necessarily mean that you did anything wrong. Take a closer look at your situation and see which of the reasons listed above is the likely culprit in your case.

The article Why Didn't I Get a Tax Refund? originally appeared on Fool.com.

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