6 Tax Refund MythsAs tax season comes to a close it’s important to understand and debunk the tax myths that are focused around tax refunds. There are many myths that are focused around your tax refund and it’s always best to consult with your local CPA to understand tax laws and better prepare yourself to avoid penalties and fines, or even disappointment. Gurian CPA has provided you with the top 6 tax refund myths.

 

1. I can’t be audited if I’ve already received a tax refund.

Try again. Generally the audit process begins three to four months after the filing deadline, the IRS has up to three years after your return has been received. The IRS can decide who to audit after a refund has been paid by sending your return through a computer check that compares it to a computer model. During this check, your return is given a Discrimination Information Function (DIF) score. The DIF score is calculated by a formula created by the IRS. All aspects of the formula are unknown for obvious reasons. However, if your return receives a high DIF score it is sent to an agent to review the refund.

In the off change that you are chosen for an audit, be sure to read How to Survive an Audit.

 

2. A good refund is a large refund.

Receiving money from the IRS is always preferred rather than having to owe money after you’ve filed your return. Although, if you’ve received a large refund from the IRS, this means that you were paying too much over the course of the year. Your objective should be to regulate your withholding exemptions, which in return will regulate the amount of tax you are paying during the year. This will help you stay more or less even with the government, rather than overpaying and giving them extra money interest free. You also don’t want to owe the IRS once your return has been processed, which is where tax planning becomes so important. Consulting with your local CPA can help you plan for the year to avoid overpaying and the possibility of underpaying and being stuck with tax payments.

 

3. You don’t need to adjust withholding for 2019 is you received a refund this year.

Annual tax planning should be done by everyone. It’s important to check withholding every year and do a paycheck checkup. The IRS also recommends you should check your withholding if you:

To check to see if you’re withholding the right amount, you can use the IRS Withholding Calculator.

 

4. Getting a refund means I can take as long as I want to file.

There is no penalty for filing a late tax return if it qualifies for a refund, although you’re still required to bring your filings up to date. For example, if you hadn’t filed your tax returns for the previous year and this year you decided to file your taxes, you will come to find that your current refund check will be held until your previous year’s tax return has been filed. The IRS allows taxpayers three years to file a return in order to claim their refund. If there have been several years that you haven’t filed your taxes and you go back to file them in order to get your current years tax refund, you will only be eligible for the refund up to three years.

 

5. The IRS legally has to pay me the refund that is shown on my tax return.

There are several reasons that could cause your refund to be different than the amount that was on your tax return. Math errors on your return that are spotted by the IRS could be one reason that your refund might be less than or even larger than you had calculated. The IRS will also deduct certain past due amounts that you may owe, such as past due taxes, child support or student loan payments. In the instance that your refund is different than you had calculated, the IRS will always send you a letter notifying you of the change. You will also receive a letter from the Department of Treasury’s Financial Management Service explaining where your refund money was redirected to.

 

6. The IRS has access to my bank account if I receive a refund electronically.

Although, the majority of taxpayers choose to file electronically, there are still a handful of people that believe that if they choose this refund option, then the IRS will have access to their bank account. Electronic filing is one of the fastest ways to get your refund, eliminates paper cost and reduces the error rate down to 1 percent, compared to the 20 percent for paper filing. Those that believe that by choosing electronic filing gives the IRS access to your bank account and allows them to track you down or to investigate your bank account, are incorrect. This does not give them access to either of those scenarios, and quite honestly, the IRS can find you with or without you choosing electronic filing.