There was a time when getting a tax refund from the IRS meant a long wait! However, with the introduction of the e-filing system, refunds are turned around much quicker than in the past. When e-filing was first introduced, only a few authorized tax preparers and people who bought the proprietary software could avail of this facility. This meant that most people paid an approved tax preparer to prepare and e-file their annual returns, and the practice of taking rapid refunds from the tax preparer, in anticipation of the actual tax refund, became prevalent and generally abused.
The process of e-filing and rapid refund has since then undergone several changes, and today, you don’t need to file your electronic returns and get your refunds through a tax preparer. Here’s how…
Definition of rapid refund
Originally, the term rapid refund was used to designate advance amounts given to clients, by tax preparing companies, prior to receiving the actual tax refund from the IRS. For providing this refund amount in advance, tax preparers levy fees and charge daily interest on the refund amount advanced, until the actual refund was received from the IRS. In this sense, this advance or rapid refund was in the nature of a loan, with high annualized interest rates. These kind of rapid refunds are also termed as refund anticipation loans or RAL. Today the term ‘rapid refund’ can be used to refer to the direct refunds made by the IRS, since the process has become much faster, thanks to e-filing.
- You do not need to use a tax preparer to file your returns electronically. This helps avoid paying the tax preparer a fee.
- Electronic filing of tax returns is free for individuals and available till 15th October for filing the previous year’s return.
- There are two options for e-filing – (a) use tax return preparing software called “Free File”; and (b) file your returns by filling up online versions of forms such as 1040, 1040-A, etc.
- Check for confirmation of receipt by checking the IRS website 48 hours from the time of filing.
- If you are eligible for a tax refund, returns filed electronically get processed faster and you can expect to receive your refund within 10 days by direct deposit to your bank account. For checks, the time taken is longer – about 2-3 weeks.
- Refunds for returns filed in paper form also take longer to process, generally about 3-4 weeks.
- Refund anticipation loans (RAL) or advances against a tax refund made by a tax preparer is now considered to be illegal.
- Information on tax refunds is made available online within 72 hours of the IRS acknowledging receipt of your electronic returns.
Refund information can be tracked at the following secure website of the IRS. Details to be provided include SSN, filing status and amount of refund.
With the new simplified process, you need not wait for weeks to receive your tax refunds. File your returns electronically and get the refund amount directly deposited into your designated bank account!