Tax Refund PapersCompleting a tax return doesn’t necessarily mean a tax refund is on its way to you. As a tax attorney in San Jose, I hear from a lot of clients who are curious as to why they haven’t received their tax refund. I’ve put together a list of 5 possible scenarios to explain why the IRS might withhold your tax refund.

Missing the Due Date

To claim the refund for a specific year, a statute of limitations applies. If you do not file a return for a particular year during which you usually receive a refund, the IRS would certainly not volunteer to have that refund sent across to you. You could head back and have the return filed for the particular year, but if you are late to file by three years or more, you can forget about the refund. For instance, if the return due date is April 16, 2018, the return must be filed on or before April 15, 2021 for the refund to be issued to you.

The Deadline

When you owe funds to the IRS, things can soon turn ugly. The agency has multiple collection measures and one of them is seizing tax refunds and applying them to the balance due. Losing the refund this way would decrease tax debt, however. If you owe back taxes to the IRS and cannot pay, file for offer in compromise or apply for an installment scheme so that your future tax refunds remain yours.

Owing Taxes to a Government Branch

The Treasury Offset Program employs taxpayer refunds to clear their debts to government agencies belonging to other states. The program is commonly used to clear delinquent student loans, although it could also be used for state income taxes or outstanding child support.

In case you are trailing on your education loans because you do not have sufficient incoming funds to make payments, check if you are eligible to move to an income-based repayment program. These plans let you pay back your school loan payments, based on a specific portion of your income. In fact, these plans could also bring your outstanding payments down to zero. In addition, they result in automatic write-offs of balances remaining after 20 years or more.

Personal Bankruptcy

If you are right in the center of the Chapter 13 or Chapter 7 bankruptcy procedure, the bankruptcy trustee could ask the court to use a portion, or the complete tax refund sum for paying off your debts. Once the bankruptcy process is done with, and you have completely discharged your debts, your future refunds won’t be grabbed by the bankruptcy court.

Tax Return Missed

If you did not file a return the previous year, the IRS could keep future refunds in possession until the missing return has been filed. If the return has been filed and you owe taxes for the particular year, the government agency would most likely use the held refund money to clear those back taxes. And if you don’t owe any taxes, you would receive your refund money once the late return has been processed by the IRS.

Getting big tax refunds basically indicates you’ve been overpaying taxes. The ideal way, therefore, to protect your money from the government agency is to modify your W-4 form and ensure your taxes are withheld at a reduced rate by your employer. You may end up not getting large chunks of money as a lump sum payment. But, on the positive side, your monthly paychecks would get noticeably fatter. Most importantly, the IRS would no longer be holding on to your money.

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