Tax season opened on January 23, 2023. With fewer pandemic restrictions in place and more tax authorities back to work—including new hires at the IRS—many are hopeful that means that tax season will be a little less stressful than in the last few years.
So far, that feels like it might be the case. Tax preparers are as busy as ever but reporting fewer hiccups early on. And while the official tax filing season statistics have not yet been released, I’ve received reports of taxpayers who already have their tax refunds—less than two weeks after filing. (I promise I’m not trying to jinx it.)
According to the Taxpayer Advocate, the IRS will be starting the 2023 filing season in much better shape than the last two years. The IRS began 2022 with an unprocessed paper backlog of 4.7 million original individual returns and 3.6 million amended returns. The IRS reported that as of December 30, 2022, it still had 2.04 million unprocessed individual returns received in 2022, including tax year 2021 returns and late filed prior year returns. Of those, 1.6 million returns required corrections or special handling, and 440,000 were paper returns waiting to be reviewed and processed. That’s a lot, but a significant improvement over last year.
As taxpayers hope those patterns hold, here’s what you need to know about tax refunds in 2023.
Timing of Your Refund
The most recent information from the IRS confirms that they still expect to issue more than nine out of 10 refunds in less than 21 days, assuming that you file electronically, rely on direct deposit, and have no issues with your return. However, if you’re expecting a tax refund and you filed on paper, it could take four weeks or more to process your return.
Other issues that could delay your return (in addition to filing on paper), include filing an amended tax return, or filing with an application for an individual taxpayer identification number (ITIN) attached.
If you requested a refund of tax withheld on a Form 1042-S—used to report foreign persons that are subject to withholding—by filing a Form 1040-NR, you should expect to receive your refund up to six months from the original due date or the date you filed, whichever is later.
As a result of the PATH Act, the IRS must wait until February 15 to issue refunds to taxpayers who claimed the earned-income tax credit (EITC) or the additional child tax credit (ACTC). This year, the IRS expects the earliest related refunds to be available in taxpayer bank accounts or on debit cards by February 28, though they note some taxpayers could see their refunds a few days earlier. Remember that the refund will be issued in one piece—the IRS isn’t allowed to release the part of the refund that is not associated with the EITC and ACTC early.
If you’re still waiting on your 2021 tax return to be processed, enter $0 (zero dollars) for last year’s adjusted gross income (AGI) on your 2022 tax return so that it’s accepted by the IRS for processing and to avoid delays. All other taxpayers should enter the correct AGI from last year’s return.
Size of Your Refund
Last year, nearly two-thirds of taxpayers were entitled to tax refunds, and the average refund was nearly $3,200. This year, most tax professionals expect to see smaller refunds.
Many of the refunds received in 2022 were tied to the enhanced Child Tax Credit. For the calendar year 2021—those returns filed in 2022—the maximum child tax credit amount increased to $3,600 per child under age six and $3,000 per child aged 6-17. But for the calendar year 2022—the tax returns that you’ll file this year—the maximum child tax credit reverted to $2,000 per child. That means that many families with children could see a drop in their refunds.
Additionally, keep in mind that all or part of your refund may be used to pay off debts including past-due federal or state income tax, state unemployment compensation debts, child support, spousal support, and student loans. Offsets did not generally apply to stimulus checks—but they do apply to federal income tax refunds. Exceptions may exist for some loans currently on a repayment pause, including federal student loans and commercially held Federal Family Education Loan Program, or FFELP debt.
And being in an installment agreement doesn’t give you a pass. One of the conditions of your installment agreement is that the IRS will automatically apply any refund to your tax balance. Your refund isn’t applied toward your regular monthly payment, so continue making your payments as scheduled.
Pocketing Your Refund
Nine in 10 taxpayers use e-file and receive their refund by direct deposit into one or more accounts. If you want your refund to be split into more than one account, you’ll need to file Form 8888.
Your refund should only be directly deposited into accounts in your own name, your spouse’s name, or both if it’s a joint account. Your refund should not be directly deposited into your return preparer’s account. And, to receive your refund by direct deposit, the total refund amount must be at least $1.
Your refund may not be eligible for direct deposit if it’s rejected by your financial institution or if more than three electronic refunds are directed into a single account. In those cases, refunds will be mailed out using paper checks.
Many taxpayers assume that the traditional paper check is the only option available other than direct deposit. But there are other ways to direct your tax refund, including buying savings bonds through TreasuryDirect or making a deposit into a traditional IRA, Roth IRA, or SEP-IRA (but not a SIMPLE IRA). You can also buy up to $5,000 in US Series I Savings Bonds issued by the Department of the Treasury.
Checking Your Refund
You can check the status of your tax refund with the IRS by using the “Where’s My Refund?” tool. It’s available at irs.gov, or you can access it on the IRS mobile app, IRS2Go, from an iPhone or Android.
Your refund information is generally available within 24 hours after the IRS indicates receipt of your e-filed return or about four weeks after you file a paper return. To check the status, you’ll need your Social Security number, filing status, and the whole dollar amount of your refund shown on your return.
There’s no need to check multiple times throughout the day since records are only updated by the IRS once per day—usually overnight.
The “Where’s My Refund?” tool should show the status of your refund in three stages:
- Return Received. This is exactly what it sounds like—the IRS has acknowledged receipt of your tax return.
- Refund Approved. Once your refund is approved, the IRS will send your refund to your bank if you elected direct deposit or through the mail if you requested a paper check.
- Refund Sent. Your refund is on its way! Wait at least five days before checking with your bank, and remember that bank policies on the availability of deposit funds may vary. If you requested a paper check, plan on a few more days.
If the IRS tells you to call or submit additional information, you should do so right away. But you should only call the IRS about your refund status if “Where’s My Refund?” tells you to.
If you’ve amended your return, you can’t use the “Where’s My Refund?” tool. You must use the cleverly named “Where’s My Amended Return?” tool. Keep in mind that amended returns take much longer to process.
If you don’t have internet access, you can try calling 1.800.829.1954 to check on your tax year 2022 refund—the automated refund hotline will not be able to give you your refund status for any other year. To check on an amended return, call 1.866.464.2050.
Finally, if you need other tax return information, you can click over to your Online Account. But contrary to rumors, there are no special codes in your account that provide faster or better refund information than the “Where’s My Refund?” tool. Ditto for calling the IRS—representatives won’t be able to provide you with additional information.
Replacing Your Refund
If your refund check is lost, stolen, or destroyed, you’ll need to take action. You can notify the IRS by using “Where’s My Refund?”, calling the automated hotline at 1.800.829.1954, or trying your hand at talking to a real person by calling 1.800.829.1040 (expect long wait times). Note that if you filed jointly, you can’t initiate a trace using the automated systems—you’ll have to complete Form 3911.
What Not To Do
Waiting for a refund check can be a stressful time for many taxpayers. To make it easier, here are a few things not to do:
- Don’t commit to a time-sensitive expenditure without your tax refund in hand. Yes, you think you know what you’re getting. And yes, the IRS says that they expect to issue refunds timely this year. But if we’ve learned anything over the past few years, it’s that things often don’t go to plan. Don’t spend money that you don’t yet have.
- Don’t call your tax preparer and ask about your tax refund status. They won’t have any information on their system that isn’t available from the IRS.
- Don’t file a second return. Taxpayers sometimes believe that filing a second tax return will move their refund along. It will likely just do the opposite.
Finally, take heart if you’re looking for your refund: You’re at the head of the line. The IRS processes individual tax returns for which refunds are due first. Tax returns reflecting tax owed are processed last (though they will promptly cash your check).