The IRS changed my refund. Now, what?

Ed note: We know how important it is to get a tax refund. While waiting for the refund to arrive can be frustrating, getting a refund that’s less than expected – or none at all – can be upsetting. Here are a few reasons this could happen, and what to do if it does happen to you. Leer en español.

Each year, about 80% of the almost 150 million total tax filers get a refund. Millions of these taxpayers are surprised when their refund is less than expected, delayed or never comes at all. Here are some of the most common reasons why the IRS changes, holds or takes taxpayers’ refunds:

  1. The IRS put your refund toward a balance you owe. Currently, more than 17 million taxpayers owe the IRS. Confiscating refunds is the best way for the IRS to collect this money. The IRS will take your refunds going forward until the amount is paid. In general, the IRS can take refunds for 10 years after you originally owed the tax.
  2. The IRS put your refund toward a spouse’s tax bill. If you file jointly with a spouse who owes taxes (or other debt the IRS is required to collect, such as child support or student loan debt), the IRS will use your joint refund to pay the amount owed. If you don’t want your portion of the refund to pay your spouse’s debt, file an injured spouse relief form (Form 8379) with the IRS. (“Injured” spouse does not mean physically injured.) The IRS will send back your share of the refund about three months after you file the form. To avoid surprises like this, it’s beneficial to get to know your spouse’s (or future spouse’s) financial situation.
  3. RefundChangedThere could be an error on your return. The IRS often holds refunds when there are credits on the tax return that increase a taxpayer’s refund. Common examples are the Earned Income Tax Credit or the Child Tax Credit. The IRS may also hold your refund if you’re under audit and will owe taxes. If the IRS holds your refund, you’ll receive notices from the IRS requesting more information. Make sure you respond by the deadline, or the IRS will assume that the refund amount on your filed return was wrong.
  4. The IRS suspects identity theft. IRS identity theft filters stop returns that might have been fraudulently filed. If this happens to your return, you may receive a notice from the IRS to confirm your identity. Respond to the notice confirming your identity, and the IRS will release the refund.
  5. The IRS changed your refund because of a dependent discrepancy. In this scenario, you either provided the wrong dependent information, or, more likely, someone else is using the dependent on his or her return (perhaps an ex-spouse). The IRS will contact you and the other taxpayer to ask questions about who is eligible to claim the dependent. The IRS will also ask for supporting documentation, such as proof that the dependent lived with a certain taxpayer during the year.
  6. The IRS rejected your return, and you haven’t refiled. This happens all too often for taxpayers who file their own returns. In this case, the answer is simple: Make the corrections and refile.

If you don’t receive your expected refund in three weeks, you should investigate why. Call your tax professional, who can get to the bottom of it. If you have not done so already, you’ll need to give your tax professional the authority to talk on your behalf with the IRS. And don’t worry; H&R Block ax professionals have experience working with the IRS on issues like this.

One more tip: If your refund went toward a balance you owed, check into it. If the balance was the result of a one-year, isolated incident, ask for that year’s penalties to be removed because of your good compliance history. The average savings to taxpayers who ask for this waiver is more than $250.

IRS Notices Mailed to Some Marketplace Insurance Recipients

Did you get health insurance through a Marketplace for 2014 but still haven’t filed a tax return for that year? You may be hearing from the IRS soon. The good news is that H&R Block is available to help. Leer en Español.

What’s going on?

If you had health insurance through a Marketplace last year and received an Advance Premium Tax Credit (APTC) to help pay premiums, you are required to file a tax return and reconcile the APTC using Form 8962. You have to file, even if you don’t meet any of the other typical filing criteria.

If you haven’t filed a return or extension for the 2014 tax year, you will get IRS Letter 5591 instructing you to file your return as soon as possible to ensure you remain eligible for the APTC in coverage year 2016.

“As with many IRS letters, the important thing is to not panic, but to take action quickly,” said Mark Ciaramitaro, vice president of H&R Block taxes and health care services.

Bring the notice to a tax pro at H&R Block for more help. You’ll need to respond within 30 days to avoid any problems getting an APTC in the future. The health insurance Marketplace opens on November 1, 2015, and must have a record of your filed return to determine 2016 APTC eligibility. No return means you may not get financial assistance for paying your health insurance premiums in 2016.

Individuals who have filed for an extension for the 2014 filing year likely will not receive Letter 5591, but should still file as soon as possible to ensure a smooth open enrollment and continuous APTC eligibility in 2016.

Have more questions about the Affordable Care Act? We can help.

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Getting into college is much more than completing an application. There are tests to take, campuses to visit and more. Your path might include specific classes, interviews or extracurriculars. Here’s a timeline, starting in junior year of high school, to help keep your college dream on track. Leer en Español.

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