As millions of Americans prepare to file their taxes this year, many anticipate receiving a return, either by direct deposit or cheque. According to the Internal Revenue Service, nearly 128 million Americans got an average refund of $2,775 from their 2020 tax returns last year.
However, the Internal Revenue Service (IRS) has urged that Americans take certain actions to expedite their tax-filing process to guarantee that they get their refund as soon as possible.
Learn all you need to know about how long you should expect to be waiting for your tax return check from Uncle Sam, how to obtain your tax refund faster, and what you should do with the money once you have it.
When you will get your 2021 tax refund, and how to file electronically
According to the IRS’s FAQ section, most refunds are processed within 21 calendar days. However, it states that due to processing challenges caused by the pandemic, it may take longer for your reimbursement to be processed and sent.
Additionally, how you submit your taxes might impact the length of time, it takes to follow the status of your refund.
If you submit your tax return online, as the great majority of Americans do, you may begin checking your tax refund status on the Where’s My Refund website within 24 hours of filing your return.
If you file by mail, the processing period will be at least four weeks longer, and you will not be able to monitor your payment status on the site until then.
Suppose you haven’t filed your taxes yet. In that case, you may want to consider doing it online using a tax service like TurboTax or H&R Block to prevent concerns such as waiting months to get your return or even losing your tax files entirely you do not file electronically.
TurboTax was named the best overall among the finest tax-filing software, while Select’s Credit Karma Tax was named the best free tax software. These services may assist you in maximizing your deductions and maximizing your refund.
It’s also worth noting that if your adjusted gross income (AGI) in 2021 was less than $73,000, you might submit your taxes for free online via the IRS.
What to do with your tax refund
According to the IRS, over 4.3 million individuals have received their tax refunds, with an average payout of $2,201 per person received until February 4, 2022. An unexpected cash infusion of $1,000 is tremendously beneficial to many Americans who would otherwise be unable to afford it.
If you are entitled to a tax refund, the following are some suggested locations to which you might direct your funds:
Unexpected events such as auto repairs, house repairs, loss of income, or sickness may cause an emergency fund to be depleted quickly. An emergency fund is often put in a high-yield savings account and can be used to cover 3-6 months of living costs. Although these accounts pay a tiny interest rate, they are preferable to a regular checking account.
Credit card deficit
Credit card debt may be a financial death sentence because of the high-interest rates associated with most credit cards. According to an Experian survey released in September 2021, the average credit card debt in the United States is $5,500 per credit card.
Furthermore, with interest rates on certain credit cards approaching 30%, it is preferable to pay off this debt as fast as possible.
Student loan debt
Although federal student loan interest and payments have been suspended for over two years, payments are set to start in May of this year.
If you have a high number of student loans (federal or private), or if your interest rate on those loans is more than 5 percent, you may want to consider paying them off.
Down payment on the house
If you’ve paid off your high-interest debt and are seeking to buy a house, you may want to consider putting your return into a savings account to use as a down payment for the purchase. In addition, as property prices rise, the amount of money required as a down payment for a mortgage is increasing as well.
In the United States, according to Rocket Mortgage, the average down payment on a house is currently 6 percent. As a result, for a $400,000 house, you will need around $24,000 in funds, not counting closing fees.
If your debt is low-interest or even non-existent, you may want to consider reporting your retirement funds, such as your regular IRA or your Roth IRA.
You may enable compound interest to work for you and help your money increase due to this. An investment of $2,200 in a basic index fund with an annual average growth rate of 7 percent over 25 years would provide a return of over $12,000.
You may be able to get a head start on your financial objectives in 2022 if you get a significant tax return. To prevent any problems getting your tax refund, it is highly recommended that you submit your taxes online and choose direct deposit to avoid any delays in receiving your refund check.