Tax Refund Withholdings and Offsets

If you owe money because of certain delinquent debts, the IRS or the Department of Treasury's Financial Management Service (FMS), which issues IRS tax refunds, can offset or reduce your federal tax refund or withhold the entire amount to satisfy the debt.

FMS
Outstanding debts include past–due child support, federal agency nontax debts such as student loans, or state income tax obligations.

Where's My Refund?

Taxpayers can check the status of their tax refund 24 hours a day, 7 days a week, worldwide, with a web browser and a few pieces of information.

• Navigate to IRS.gov and click the Where My Refund button,
• Next enter the social security number of the primary taxpayer. This information can be pulled from the upper right corner of Form 1040.
• Select the filing status from Boxes 1 through 5
• Finally, enter the exact amount of your refund from line 74a of Form 1040.

Generally, if the taxpayer e-filed, the refund information will available 72 hours after the acknowledgment saying the IRS received the tax return – allow three to four weeks if filing a paper tax return.

The Cliff Notes of Form 1040

A lot of taxpayers use a paid preparer when filing their return. It doesn't hurt to understand a few basic rules about Form 1040.

First you need to determine if you have To file a tax return? Once you've done that let's look at the different sections of the tax return.

Filing Status
There are five filing status available. Married taxpayers can file together (Married Filing Jointly) or apart (Married Filing Separate). Single, Head of Household, and Qualifying Widower are filing statuses for unmarried taxpayers.

The Clock is Ticking

If you haven't filed a prior year tax return, it's not too late. Generally, a refund can be claimed by filing the tax return within three years from the due date.

That means if you haven't filed your 2007 return, the deadline is April 18, 2011 to claim your refund. If you extended that return, the due date is October 17, 2011.

The Internal Revenue Service (IRS) announced that it has $1.1 Billion for People who have not filed a 2007 tax return.

Don't wait any longer, file your return.

Received my income tax refund - Now what?

Congratulations on receiving your refund. Now it's time to get your financial house in order. Below are some priorities:

$10,000 reserve fund - You've heard this one many times. Few taxpayers have an adequate emergency fund that could be used for living expenses in the event of a major crisis, like job loss. Having three to six months in a reserve fund is recommended. With $10,000 at least it's a starting point.

Credit Card Debit - Now that the new credit card rules are in place, it's imperative that your credit card debt be managed. A credit card charging 18% interest will be difficult to pay off.

401k - Failure to fund your 401(k) can be like throwing away free money because you could be passing up the employer match. The contribution withheld from your paycheck also reduces your taxable income.

Why e-file?

In 2010, 99 million taxpayers e-filed their return last year. That's an increase of 10% from a year ago and represents 70% of all individual taxpayers. Here's why people e-file:

• Faster Refunds – with direct deposit, you can receive your refund in as little as 8 days.
• Greater Accuracy – error rate for paper returns is 20%; 1% for e-filed returns.
• Secure and confidential submission – there has never been an IRS e-file security breach
• File now, pay later – e-file does not mean you have to pay a balance due. You can postpone that until April 15
• Quick confirmation – receipt of your e-filed tax return is within 24 hours
• Convenience - accessible 24 hours a day, 7 days a week
• Most importantly, no paper return to mail

Starting January 1, 2011 most tax return preparers must be authorized IRS e-file providers so they can transmit tax returns electronically.

For more information, refer to the IRS e-file resource.

Refund too high?

Big refund this year? You're not alone. Taxpayers received an average refund of $3,003 last year - up 5% from the average refund of $2,859 taxpayers received in 2009.

The jump was the biggest in years thanks to several tax benefits as part of the American Recovery and Reinvestment Act.

• First-Time Homebuyer
• American Opportunity Credit
• Earned Income Tax Credit increases
• Increase in eligibility for the Child Tax Credit

Take steps now to receive some of that money throughout the year. Submit a new Form W-4 to your employer or a Form W-4P to your pension administrator. If you're eligible for Earned Income Credit, submitting a Form W-5 to your employer will allow to receive the credit throughout the year.

You can use IRS Pub. 919 and IRS Withholding Calculator for additional assistance in calculating your tax withholding.