Tax refunds 2020: Will your check be bigger?
The ultimate goal of proper withholding is to pay so much each month that you neither owe nor are owed come April
'Everyday Millionaires' author Chris Hogan says saving and investing your money will help those with refund confusion as tax season is underway.
Last year’s tax season kicked off with a few controversies – including many people’s confusion over the size of their refund checks – a problem that may only be resolved for some Americans this year.
Despite a general lack of knowledge about tax refunds, 46 percent of people were expecting to receive refund checks of $1,000 or more this year, according to a survey from CreditKarma.
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TAX SEASON 2020: WHEN TO EXPECT YOUR REFUND
The average refund last tax season was about $2,725, as the IRS doled out about 95.7 million checks. It processed about 130.7 million returns as of April.
But whether checks will be bigger this year ultimately depends on the actions people took – or didn’t take – since last April.
Last year was the first filing under the sweeping changes enacted via the Tax Cuts and Jobs Act. Many people did not check their withholding amounts leading into last tax season despite the government’s advice to do so. As a result, many people were confused when they received little or no refunds despite having a similar financial situation to the year prior. Some even owed the tax agency for the first time.
Unless you filled out a new form, your current Form W-4 is still being used. That means any surprises could be exacerbated this year unless you adjusted your withholding to change how much you paid in taxes throughout the year.
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While many people look forward to receiving a tax refund each year, the ultimate goal of proper withholding is to pay so much each month that you neither owe nor are owed come April.
Proper withholding is important for another reason – taxpayers who underpay are at risk of facing a penalty. During any given year, taxpayers can avoid the underpayment penalty if they paid withholding and estimated tax of at least 90 percent of the amount owed.
The IRS has a withholding calculator that can help determine how many allowances to make.
But if you are expecting a refund this year, according to the IRS, most refunds are issued in less than 21 calendar days if filed electronically. For those who mail in a paper return, the turnaround is slower – about six weeks.