Getting a tax refund when you owe taxes may seem counterintuitive, but it is possible under certain circumstances. The key factor is whether you had more tax withheld from your paycheck over the course of the year than you actually owed in taxes. Let’s break this down further:
What does it mean to “owe” taxes?
You owe taxes when the total tax liability on your income for the year exceeds the amount of taxes you already paid. Your total tax liability is calculated based on things like your taxable income, tax bracket, and any tax credits or deductions you qualify for.
For example, if you earned $50,000 in taxable income and your total tax liability worked out to $8,000 based on your tax bracket and situations, but you only paid $6,000 in taxes from your paycheck withholdings over the year, you would owe $2,000 when you file your tax return.
How could you get a refund if you owe taxes?
Even if your total tax liability exceeds the tax you already paid during the year, you may still get a refund if you overpaid taxes out of your paycheck.
For example, if you owed $8,000 based on your income and situations, but had $10,000 withheld from your paycheck over the year, you would get a $2,000 refund when you file your return. This is because the IRS looks at how much you paid in (the $10,000 withholding) versus how much you actually owed (the $8,000 liability) and sends you a refund for the difference.
So in short, if the amount withheld from your paycheck exceeds the total tax you owe for the year, you will get a refund for the overpayment, even if you technically owed an underpayment based on your final tax liability.
When will I get my refund if I owe taxes?
If you are owed a refund, the timing works the same way regardless of whether you owed taxes or not. Here is when you can expect to get your refund:
- E-filing with direct deposit – Within 21 days after e-filing if you choose direct deposit for your refund.
- E-filing without direct deposit – Within 6 weeks after e-filing if you do not choose direct deposit.
- Paper filing – Within 6 weeks after your paper return is received by the IRS.
During tax season, most refunds are issued within 21 days for e-filers. But refunds for paper returns or returns claiming certain tax credits may take 6 weeks or longer to process.
If you file your return more than 3 weeks before the April tax deadline, you should expect to get your refund sometime before the deadline. Returns filed at the deadline or after will generally get refunds issued after the deadline passes.
Does the amount I owe affect when I get my refund?
The amount you owe does not affect the timing of your refund directly. The IRS processes refunds based on factors like filing method (e-file vs paper) and choosing direct deposit, not the size of your tax liability.
However, there are some situations where owing taxes can delay a refund:
– If you file late, past the April deadline, it may take longer to process your refund if you owed taxes.
– If you are subject to further review for issues like math errors that require correction, it may take longer. Owing taxes can sometimes increase the chances of a review.
– If you owe taxes to certain government agencies like state taxes or child support, your refund may be reduced or delayed.
But in general, owing taxes itself does not directly cause a refund delay as long as you file on time. The refund timing is based on IRS processing timeframes.
What if I’m waiting on a refund but still haven’t filed my return?
If you expect a refund but have not yet filed your tax return for the year, you should file as soon as possible. The IRS cannot start processing your refund until they receive your completed tax return.
Here are some key points about filing if you are owed a refund:
- There is no need to wait until April to file if you are owed a refund. File as early as you can to get your refund sooner.
- The IRS accepts returns starting in late January, so you can file your return then if you have all your tax documents ready.
- The longer you wait to file, the longer it takes to get your refund since the IRS can’t process returns they don’t have.
- Tax returns claiming refunds must be filed within 3 years to be valid. After that, the money becomes property of the U.S. Treasury.
- E-filing and direct deposit will get you your refund fastest – within 21 days when using both.
The bottom line is that you should never delay filing your return if you are owed a refund. It does not benefit you financially to wait, and you can miss the chance to claim your refund if you wait too long. File as soon as you have all your tax information to get your refund processed quickly by the IRS.
What if I’m late filing my return and owe taxes?
If you have not yet filed your prior year’s tax return and you know you will owe taxes when you file, you should still file as soon as possible for several reasons:
- The failure-to-file penalty is usually more than the failure-to-pay penalty. It continues accruing the longer you wait to file.
- You cannot qualify for a payment plan with the IRS until you have filed your tax return.
- If you are owed a refund on the current year’s return, you won’t get it until prior year taxes are addressed.
- The IRS may file a return for you based on available information, which could cause errors and penalties.
- Interest continues growing on unpaid balances until they are paid off.
Here are some tips if you owe taxes and have late returns to file:
- File all late returns at the same time and request a payment plan to consolidate your balance due. This minimizes penalties.
- If you can’t pay your full balance due, pay as much as you can when you file and get on a payment plan for the rest.
- Consider options like an IRS Offer in Compromise if you cannot afford to pay your full tax debt.
- Seek help from a tax professional if you are dealing with multiple late returns or tax debt issues.
Even if you cannot pay everything you owe, you should still file your returns on time every year to avoid further issues with the IRS. This will also enable you to start resolving your tax debt and get on a payment plan if needed.
Can I get an extension if I owe taxes?
Yes, you can get an extension to file your tax return if you owe taxes to the IRS. Here are some key points about tax extensions:
- Filing an extension gives you an extra 6 months (until October 15) to file your return and pay any tax due.
- An extension provides more time to file, but not more time to pay. Your full tax payment is still due April 15.
- To get an extension, file IRS Form 4868 by April 15 and pay an estimate of your tax liability.
- You must pay at least 90% of the taxes you expect to owe to avoid penalties.
- Even with an extension, you will owe interest on any taxes paid after April 15.
- File the extension on time – you cannot get an extension after April 15.
Reasons you may need an extension if you owe taxes:
- You are waiting on a missing form like a K-1 that you need to file.
- You need more time to liquidate assets to pay what you owe.
- Your tax situation is complicated and you need an extra 6 months to resolve it.
- You need more time to get professional help with your taxes.
- You had personal issues like family loss or illness that delayed your filing.
An extension gives you more time so you can file a complete and accurate return. But keep in mind it is primarily for filing, not payment, purposes. Take steps to pay on time by April 15 even if you extend your filing deadline.
Should I amend my return if I’m due a refund?
You may need to amend your tax return if you made errors or omissions that led to your refund being too small. Here are some reasons to consider amending your return to get an additional refund:
- You forgot to claim deductions or credits you qualified for.
- You received another form like a corrected 1099 after filing that changes your tax situation.
- You entered information like your Social Security number, filing status, or dependent info incorrectly.
- You qualify for recently enacted tax law changes retroactively.
- You paid taxes on unemployment compensation that is now tax-exempt.
Before amending, recheck your original return closely and be sure the extra refund is worth the time and effort to amend. Make sure the dollar amount justifies amending, since it can take months to process.
To amend and claim an additional refund, file Form 1040X within 3 years of your original filing. Have your original return handy, correct any errors, and attach supporting forms or schedules that relate to your increase in refund.
You may need to mail your amended return if you e-filed originally. Track your amended return status online using the IRS “Where’s My Amended Return” tool. Expect long processing times due to IRS backlogs.
When will I get my additional refund if I amend?
If you amend your return for a larger refund, expect long wait times. The IRS says it may take up to 16 weeks just to process an amended return, plus more time to issue your refund.
Here are some general timelines:
- Processing amended return – Up to 16 weeks
- Correcting errors on amended return – Up to 16 additional weeks if errors
- Issuing amended refund check – 4-6 weeks after processing finishes
So if you claim an additional $1,000 refund through amending, it may easily take 6 months or more to get your money after you mail in your 1040X form. The IRS is very backlogged on amended returns. File as early as possible to get in line.
You can check your amended return status online or by calling the IRS. Make sure you receive and cash your additional refund check promptly, as they expire one year after being issued.
Conclusion
While owing taxes and getting a refund may seem contradictory, it is possible if you overpaid your taxes during the year through withholding. File your return promptly, whether you owe or not, to maximize your refund opportunity and minimize interest and penalties on taxes due.
If you missed claiming refunds in prior years, make sure to amend within the 3 year window – but be prepared for very long wait times to get your money. The key is filing all required returns and paying as much as you can by the annual deadlines. Do not delay filing a return just because you end up owing taxes.