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ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – COMMON MYTHS CONCERNING TAX REFUNDS – REALITY CHECK

By Robert S. Schriebman

2020

Introduction

Getting your tax refund is a priority.  This is especially true in today’s pandemic environment.  Refunds may be more significant today than they have ever been.  There are both myths and superstitions that surround the tax refund process.  The IRS has recently issued an important publication attempting to debunk tax refund myths, IR-2020-161, July 16, 2020.

Before discussing myths about tax refunds, let’s do a reality check straight from the IRS:

  • You will get your refund faster if you file your return electronically as opposed to filing the traditional paper return. This is especially true today when no one is at their desk at the IRS because of COVID-19.
  • Paper returns cause processing and refund delays.
  • The IRS advises that the best and easiest way to check the status of your refund, is to go to IRS.gov and check, “Where’s My Refund?”
  • “Where’s My Refund?” is updated daily.
  • You can also check the status of your refund by using the IRS app IRS2Go mobile app.
  • The status of your refund can be checked within 24 hours after you receive the e-file acceptance notification.
  • Once you file your paper return, do not file the same return again or call the IRS. It is clear from the IRS news release that paper filing is being discouraged and put on a lower priority.

Interest Is Paid on Delayed Refunds

COVID-19 has caused a dramatic reduction of onsite IRS personnel.  Of course, this is causing refund delays.  The Internal Revenue Code mandates that interest be paid on all delayed refunds, especially paper-return refunds.  Returns that were filed by April 15th will earn interest from April 15, 2020.  As a side note: for years the IRS has paid taxpayers a reduction of 1% compared to what is charged taxpayers for late return deficiencies or audit-based adjustments.  Interest paid by the IRS is considered taxable income, so you will have to declare this interest on your return filed in 2021.

Common Myths About Tax Refunds

Myth Number 1: Getting a refund this year means there’s no need to adjust withholding for 2020.

Some of us may be surprised and disappointed when a refund turns out to be smaller than anticipated. You may be able to compensate and plan ahead by adjusting the number of withholding exemptions claimed.  Check your W4 with your employer.  Meet with your accountant to adjust quarterly estimated tax payments.

Myth Number 2: Calling the IRS or a tax professional will provide a better refund date.

Don’t fall for TV advertisements promising you big refunds.  Avoid return preparers who promise you big refunds by taking phony deductions or deductions that cannot be supported by appropriate documentation.

Myth Number 3: Ordering a tax transcript is a secret way to get a refund date.

As they say in the Big Apple, “Fuggettaboutit.”  Ordering a transcript does not facilitate the refund process.  Some practitioners advise their clients that ordering transcripts may get you on the IRS radar.  This too may be one more myth.

Myth Number 4: the “Where’s My Refund?” tool is wrong because there’s no deposit date yet.

“Where’s My Refund?” may show that the IRS has received the return.  This means that the return has indeed been received and is being processed. Some returns take longer to process than others.  For example, the return may show errors or be incomplete.  Your return may be affected by identity theft or fraud. If the IRS needs more information, you will be contacted, but in today’s COVID-19 that contact may be delayed.

Myth Number 5: Something is wrong when the refund amount is less than expected.

There could be errors and mistakes on the return.  Most returns are reviewed before refunds are issued.  The review may find questionable items.  You may owe child support, have a student loan, or you may owe taxes from prior years or you may owe California taxes.  The IRS has agreements with states to offset the federal refund when state taxes are owed.

Conclusion

We all want our refund and perhaps in these times that refund is more important than ever.  If you are not getting your refund, contact the IRS or contact a reputable tax professional for help.   Tax professionals may not be able to speed up the refund process, but they may be able to give you insight and peace of mind.

***

Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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