As Americans begin to file their taxes this year, millions expect to get a refund either via direct deposit or check. Last year, over 128 million Americans received an average refund of $2,775 from their 2020 tax returns, according to the IRS.
However, the IRS has recommended Americans take several steps to fast-track their tax-filing process to ensure they get their refund as quickly as possible.
Here's what you need to know about how long you should expect to wait for your check from Uncle Sam, how to get your tax refund quicker and what you may consider doing with the money.
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When you will receive your 2021 tax refund, and how to file electronically
The IRS states in its FAQ section that most refunds are issued within 21 calendar days. However, there's a disclaimer stating that due to processing issues caused by the pandemic, it may take longer to deliver your refund.
Additionally, how you file your taxes can affect how long it takes to track the status of your refund. If you file electronically like the vast majority of Americans do you can start tracking your tax refund status within 24 hours of filing on the Where's My Refund site. However, if you file by mail, your processing time extends to at least four weeks to see your payment status on the site.
So if you haven't filed your taxes yet, you may want to consider filing electronically with a tax service like TurboTax or H&R Block to avoid issues like waiting for months to receive your refund or even losing your tax files altogether. Select ranked TurboTax as the best overall tax-filing software and Cash App Tax (formerly Credit Karma Tax) as the best free tax software. These services can help you maximize deductions and increase your refund.
Also keep in mind that you can file your taxes online for free through the IRS if your adjusted gross income (AGI) was less than $73,000 in 2021.
TurboTax
Cost
Costs may vary depending on the plan selected - see breakdown by plan in the description below
Free version
For simple tax returns only. Not all taxpayers qualify. See if you qualify.
Mobile app
Yes
Live support
Yes, costs extra
Terms apply, see below for our methodology.
Pros
- Step-by-step guidance with a Q&A format that is easy to follow
- TurboTax Live provides on-demand advice and a final review from a tax expert
- Live Full Service has a tax expert prepare, sign, and file your return
- Accuracy and maximum refund guaranteed*
- Audit support, which provides free assistance if you get an IRS or other tax notice
Cons
- More costly than other software programs
- Live expert assistance plans have additional costs
Cost breakdown by plan:
- Free (For simple tax returns only. Not all taxpayers qualify. See if you qualify): $0 federal, $0 per state
- Deluxe (helps you maximize credits and deductions): $59* federal, $59* per state
- Premier (includes returns with investments and expenses): $89* federal, $59* per state
- Self-employed (for personal and business income and expenses): $119* federal, $59* per state
- Live Basic (includes help from tax experts): for a limited time, $0* federal, state included - simple tax returns only; must file by 3/31
- Live Deluxe (includes help from tax experts): $129* federal, $64* per state
- Live Premier (includes help from tax experts): $179* federal, $64* per state
- Live self-employed (includes help from tax experts): $209* federal, $64* per state
- Full Service Live Basic (includes help from tax experts; simple tax returns only): $209* federal, $54* state
- Full Service Live Deluxe (includes help from tax experts): $259* federal, $64* per state
- Full Service Live Premier (includes help from tax experts): $369* federal, $64* per state
- Full Service Live self-employed (includes help from tax experts): $399* federal, $64* per state
*Click here for TurboTax offer details and disclosures
**A simple tax return is Form 1040 only.
Cash App Taxes (formerly Credit Karma Tax)
Cost
$0 federal and state
Free version
Yes
Mobile app
Yes
Tax expert support
No
Terms apply, see below for our methodology.
Pros
- Completely free to use
- Get access to Cash App Tax services like credit monitoring alerts and credit score updates
- Audit defense, which gives you support from a representative if the IRS audits your tax return
- Maximum refund guarantee, or Cash App will pay you the difference up to $100 ($25 minimum)
- 100% accuracy, or Cash App will reimburse you for any penalties up to $1,000
Cons
- Only available in 40 states and D.C.You can't file with Cash App Taxes (formerly Credit Karma Tax) if you lived in a state for only part of the tax year, earned income in more than one state during the tax year or earned income in a state you didn't live in
- No support from tax professionals
What to do with your tax refund
Through Feb. 4, 2022, over 4.3 million people have received their tax refund at an average of $2,201 per person, according to the IRS. And with many Americans unable to afford a $1,000 emergency, a refund of that size is extremely helpful.
If you receive a tax refund, here are some starting points of where you can send those funds:
- Emergency fund: Typically deposited within a high-yield savings account, an emergency fund is typically 3-6 months of living expenses stowed away in case of an unexpected event such as: car repairs, home repairs, loss of income or illness. These accounts have a modest interest rate, but it's better than a typical checking account.
- Credit card debt: Credit card debt can be a financial killer because of the high interest rates most cards have. The average credit card debt in the U.S. is $5,500 per card, according to an Experian study published in Sept. 2021. And with interest rates on some cards near 30%, it's best to pay down this debt as quickly as you can.
- Student loan debt: Although federal student loan debt interest and payments have been on hold for nearly two years, payments are expected to resume in May. If your student loans (whether federal or private) are large, or have an interest rate above 5%, you may consider paying down those debts.
- Down payment on home: If your high interest debt is paid down and you're looking to purchase a home, you could consider throwing your refund into a savings account for a down payment. And with home prices soaring, the needed down payment to secure a mortgage is also going up. The average down payment on a home is now 6%, according to Rocket Mortgage. So on a $400,000 home, you will need roughly $24,000, not including closing costs.
- Long-term investments: If your debt is low-interest or even eliminated, you may consider filling your retirement accounts such as a traditional IRA or Roth IRA. By doing this, you can allow compound interest to help your money grow. In fact, $2,200 invested into a simple index fund with a modest 7% annual average growth rate over 25 years can grow to nearly $12,000.
Bottom line
A sizeable tax refund can give you a jumpstart to accomplishing your financial goals in 2022. But before you plan on what to put your tax refund to, it's strongly advised to file your taxes online and opt for direct deposit to avoid any issues receiving your check.
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