Though not all Americans are okay with how income tax is spent, we all look forward to the time that we’ll receive a refund from Uncle Sam (the IRS). The thought of the Internal Revenue Service issuing you a refund is nothing more than an early Christmas present. The biggest issue, however, is: how much can you get back?
According to the Washington Post, the average income tax refund is $3,046. But still, this doesn’t mean that you are guaranteed this amount. As we’ll later see, some factors come into play that can either increase or decrease your expected tax income refund. But before going any further, let’s look at two cases that you might relate to:
Case 1 – A single 30-year old man with no kids who makes $75,000/year
Supposing that this man withheld $15,000 but did not collect any government benefits, he can expect about $5,195 in a tax refund. This is $2,000+ on top of the average income tax refund.
Case 2 – A 45-year old married woman with 3 kids who makes $100,000/year
If the kids are below 17 years and she withheld about $30,000, she can expect about $20,584 as an income tax refund.
How Can You Confirm Your Income Tax Refund?
Generally, there are 3 major ways for checking the status of your income tax refund:
The IRS Website – By visiting www.IRS.gov, you can quickly check the status of your income tax refund. You can also use this platform to launch a complaint with Uncle Sam. Here are the basic steps to follow:
- File your e-tax and wait for 3 days before checking the status of your tax refund. In case you had filed your taxes manually, then you may have to wait up to 3 weeks before you can check the status on the website.
- Look at your tax return copy to identify your social security number, tax refund amount, and filing status.
- Click on ‘Where is My Refund?’ to see the status of your refund.
Mobile App – With a smartphone, you can download the IRS2Go mobile append use it to check the status of your tax refund. You’ll need to log into your IRS account to check the details. The advantage of using a mobile app is that you can also check other tax details besides the refund status. You can also use the app to edit most tax details. It’s generally user-friendly.
Toll-Free Number – Lastly, you can give Uncle Sam a call using these toll-free lines:
This is a quick way to check your tax refund status without having to go online. It allows you to get immediate feedback about your status without spending a cent.
How Can You Improve Your Income Tax Refund?
In general, factors like credits and deductions are important in determining income tax refunds. As a result, most taxpayers have mastered several tricks to use the two to their advantage. Here are the common ones:
Married status over the separate status
Though filing your taxes as a married couple involves so much work, it can grant you a higher refund than what you get when you do it separately. So, if you are married, it doesn’t make sense to file your taxes separately when you could earn some credit if you do it as a couple. Just talk to your spouse about it and let him or her know the benefit of married status over separate status.
You need to observe the calendar closely if you are looking to enjoy a more tax refund. For example, paying your mortgage by December 31st can help you earn more tax refunds. Similarly, you can improve your tax refund if you schedule your college exams or medical treatment towards the end of the financial year.
If you have kids under your care, then you should claim the Child and Dependent Care Credit (CDCC). You can also claim the Other Dependent Credit (ODC) if you have parents or grandparents that you support. Considering that some people have claimed up to $500 as ODC, you should check with the taxman to see if you qualify.
Claim opportunity credits
If you don’t have an outstanding tax bill and you are an undergraduate college student, you may qualify for the American Opportunity Credit. In case you are a postgraduate student, then you should check your eligibility for the Lifetime Learning Credit. Check on the IRS website for eligibility for both credits.
Improve your retirement savings
You can lower your taxable income and boost your tax refund by improving your retirement contribution. The interesting thing about this idea is that your money is not lost. On the contrary, it’s somewhere safe where you can access it in the future. Whether self-employed or a contract employee, opening a retirement savings account is always a sensible idea.
Increase your HSA contributions
If you are contributing to your Health Savings Account, you can also use your contribution to lower your taxable income and improve your tax refund. There are several requirements, nonetheless, you have to meet and so it’s a good idea to check with the IRS. For example, the contribution has to be an after-tax contribution.
After buying a property like land or a home, you should keep the receipt safe as you can use it to claim a credit. Depending on the property that you buy, you can claim up to $10,000 as a tax credit. You’ll need to talk to a lawyer, however, to help you with this. The expert can help you know how much to claim as a credit.
Give to charity
You are allowed to claim up to 14 cents for each charity mileage. Thus, the more you give to charity, the more tax refund you are entitled to. The beauty of this tip is that it’s self-fulfilling. The idea of giving to charity is more satisfying that the refund itself.
It’s quite unfortunate that more than 20% of taxpayers are not familiar with the Earned Income Tax Credit (EITC). Whether you have kids or not, you should check with the taxman to ensure you are eligible. For instance, your gross income needs to be less than $51,492 if you are filing your taxes jointly as a couple.
Knowing how much income tax refund to expect from the IRS is fundamental in achieving your yearly financial savings goals. So, take advantage of the available tricks to ensure that you bag the most refund. You can use this guide as a starting point.