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Is there any way to predict the amount of a tax refund?

Posted on January 8, 2020

It certainly would be helpful to be able to predict the amount of one’s tax refund – especially before filing. But is that possible?

Sometimes you can get fairly close to the ballpark amount, say the CPAs at Teipen Selanders Poynter and Ayres. Naturally, there are a lot of factors to consider.

If you know your total income and total deductions are about the same in 2019 as the were the previous year – barring any other major life changes (such as a divorce, buying a new house, selling a lot of stocks, or having a baby, for instance), you could make a reasonable assumption that your tax refund would be similar to the previous year’s.

That said, we are pragmatists here at TPSA. We always err on the side of caution, for our clients’ sake.

Here are some valid reasons your refund might be less than you are hoping it will be.

Certain transactions can affect 2019 tax withholding and influence an anticipated refund, such as:

  • Year-end and holiday bonuses
  • Stock dividends
  • Capital gain distributions from mutual funds and
  • Real estate or other property sold at a profit.

If any of these situations applies to you, you can still make a quarterly estimated tax payment directly to the IRS for tax year 2019. In fact, the deadline for making a payment for the fourth quarter of 2019 is Wednesday, Jan. 15, 2020. Your CPA can help you figure out the right amount of estimated taxes to pay, or you can download worksheet Form 1040-ES available on the IRS website.

Something else to be careful about: Taxpayers who pay too little tax during the year, either through withholding or estimated tax payments, may be charged a penalty when they file. In some cases, a penalty may apply if your estimated tax payments are late, even if you are due a refund when you file.

What if you think your refund is going to be larger than usual?

A good use of this windfall may be to use it to pay/offset other debts including tax debt from previous years, such as:

  • Past-due federal tax
  • State income tax
  • State unemployment compensation debts
  • Child and spousal support
  • Other federal nontax debts, such as student loans.

You will receive a notice if any prior owed debt meets the criteria for an offset. In this case, the IRS will issue any remaining refund in a check or direct deposit requested on your return.

 Of course, once your tax return has been filed electronically and your precise refund ascertained, you can track your refund using Where’s My Refund?, the popular IRS tool that checks the status of your refund. Information posts within 24 hours after the IRS has received your electronically filed tax return. The tool will provide a personalized date you can expect a refund after the IRS processes the return.

However, TSPA CPAs caution that you should also take into consideration the time it takes to receive a check by mail, or for your financial institution to post the refund to their account – even if you use direct deposit.

At Teipen, we work hard to ensure our clients get every tax dollar back legally possible under the present IRS regulations. We also want to be sure our clients don’t spend expected funds before they actually arrive.