Learn how to get your federal income tax refund fast
By Jim Sloan
I drove by one of those sign wavers dressed up as the Statue of Liberty this morning. Maybe you've seen one or two of them in your town. They wear green costumes and direct people to the offices of their employer, Liberty Tax Service, which prepares tax returns for people.
Weird thing was this particular sign waver had a beard. The Statue of Liberty endures some pretty harsh conditions there in New York Harbor, but last time I checked things weren't so bad that the towering lady had grown a beard.
Other changes expected in your federal income tax return
There are some other things about this federal income tax season that are off kilter, as well. For one thing, outfits like Liberty Tax Service and other businesses that figure out your tax deductions for you are not likely to be making as many refund anticipation loans as they used to.
Those loans are attractive to many people who can't afford to pay to have someone prepare their return. With a refund anticipation loan (RAL), though, they can have their return completed and e-filed and the company will give them a check right away--minus the "processing fee" and the tax preparation fee.
The tax preparation companies' RAL business has been handicapped this year by the IRS's decision to stop providing tax preparers with "debt indicators," which let the companies know when their client's refund might be withheld for outstanding debts. The IRS said that with electronic filing and direct-deposit refunds, the debt indicators are no longer necessary.
Many nonprofit groups are also trying to derail the RAL business by offering lower-income taxpayers free tax preparation when they have their refunds directly deposited into cooperating credit unions, who charge a far smaller processing fee. The goal of the program, such as the Earn It! Keep It! Save It! Program in the San Francisco Bay Area, is to help people get bank accounts and to start saving money.
As a result of these changes, H&R Block Inc., which made nearly $150 million on those loans last year, has decided not to offer them in 2011. According to the Winston-Salem Journal newspaper, the loans reached a peak in 2002 when 13 million were made, but analysts expect only 2 million this year.
The push for e-filing and direct deposit
The IRS is really encouraging people to file electronically and take advantage of the direct deposit offer. It gets people their tax refund in 10 to 14 days instead of the three to four weeks required for a paper check, and the process saves the federal government a lot of money.
The tax season--at least for those who itemize their deductions--was delayed somewhat by the last-minute tax bill passed by Congress in December 2010. This required the IRS retool its computers and delay processing the more complicated returns till mid-February.
But if recent trends hold steady, most people will e-file and get their refunds in a timely fashion. Last year, out of 142 million tax returns filed, 98.7 million were e-filed, and about two-thirds of those e-filed returns were prepared by professional preparers.
E-filers--and refunds for them--on the rise
Still, the number of people e-filing on their own was up 8 percent to 35 million people, and not surprisingly the number of visitors to the IRS website was up, despite the availability of turbo tax or some of the best online tax software available.
The average refund last year was a cup of coffee over $3,000, up 5 percent from the previous year, according to one of the myriad spreadsheets you can examine on the IRS website. The average federal income tax refund for those using direct deposit was nearly $3,200, a nearly 6 percent increase over the previous year.
Nearly half a million people from various federal tax brackets took advantage of the first-time homebuyers' credit, earning $3.5 billion in total tax credits. The greatest number of first-time buyers was in California, where 58,179 people got $442 million in tax credits, and Florida and Texas were close behind with 46,000 and 42,000 people respectively.
Understanding that e-filing and direct deposits leave a lot of uncertainty (Did they actually get my return? When is that refund going to show up?), the IRS is providing an online tool, "Where's My Refund," that lets people track the progress of their money. All you need is your Social Security number, your filing status and the exact whole-dollar amount of your refund. Information about your refund will be available 72 hours after the IRS has acknowledged the receipt of your e-filed return.
Jim Sloan is a freelance writer in Reno, Nev.