3 Frequently Asked Tax Questions You May Be Asking Now
Even though Tax Day has passed, there are some questions about your taxes that may still be on your mind. If you're waiting for a refund, you might be wondering when it will arrive in your mailbox or bank account. Or, you may realize that your return contained a typo or needs some other changes, and aren't sure what to do. Finally, maybe you still owe the IRS money, and want to know what options you have.
1. When will I get my refund?
The IRS issues over 90% of refunds within 21 days of accepting a return. You can check the status of yours on the IRS website's Where's My Refund?tool. The information provided is updated daily, and can tell you the status of your refund within 24 hours of the IRS receiving your e-filed return, or within four weeks of mailing your paper tax return.
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In some cases, your refund might take longer than the 21 days. To name a couple of examples, if your return includes errors or is incomplete, or if your return includes an Injured Spouse Allocation, your return could take longer. If you filed an amended return (more on those in a bit) and it resulted in a refund, these are generally issued within 14 weeks. In fact, there's a separate tool to check the status of an amended return.
2. What if I need to change something after I file?
This is a pretty common situation, and you can file an amended return with IRS form 1040-X. You can use this form to claim an additional refund, report income you just received documentation for, or fix a typo on your return, just to name a few situations. For example, if you made last-minute contributions to a traditional IRA and want to claim a deduction, you can do that by filing an amended return, and receive an additional refund if you're entitled to one.
You can file an amended return for a credit or refund within three years (including extensions) from the date you filed your original return, or within two years after the date you paid the tax, whichever is later.
3. I still owe the IRS money. What can I do?
If you owe the IRS money for the 2016 tax year, it was technically due on the April 18 tax deadline, even if you filed an extension. If you're indebted to the IRS, interest and penalties will accumulate on your unpaid balance retroactive to the deadline. The current IRS interest rate is 4% per year, and the penalty for late payment is 0.5% per month or part of a month you're late. (Note: The penalty for not filing at all is 10 times as much -- 5% per month -- so it's a smart idea to file your tax return, even if you can't pay.)
If you will be able to pay the balance in full, you can quickly apply online for up to 120 additional days to pay. To be clear, interest and penalties will continue to accumulate, but by doing this, the IRS won't continue other collection efforts before your new payment deadline.
If you need more than 120 days, you also have the option of setting up an installment agreement to pay your tax over time with monthly payments. If you owe less than $50,000 ($25,000 for businesses), you can apply for an installment agreement online. The process is quick and relatively painless. You can choose to divide your unpaid tax bill into as much as 72 installments -- just be aware that the longer you take to pay, the higher your interest and penalties will be.
If you can't pay in full or through installments, there are still other options, such as requesting an Offer in Compromise (paying less than you owe), or asking the IRS to temporarily delay collection efforts until you're able to pay.
The bottom line is that the IRS wants to work with you to get your taxes paid, so don't ignore the situation. Figure out the best option for you, and then take the appropriate steps to set it in motion.
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