How Long Can the IRS Hold Your Refund for Review (2024)

Once the tax filing season is over, we’re eagerly awaiting the due return of overpaid taxes. However, we may occasionally find ourselves embroiled in the complexity of IRS refund reviews.

Herein lies the pressing question: “How long can the IRS hold your refund for review?” The specter of unexpected delays, rigorous reviews, and adjusted refund amounts can be daunting. Yet, by understanding the process, we can alleviate some of the stress.

The underlying causes of refund delays

When the IRS withholds or takes your refund, it’s more than a mere financial inconvenience or issues of the amount of tax you owe. It’s an indication of potential discrepancies in your tax profile in general. Here are the common reasons why the IRS might be holding your refund:

1. Questions about your tax return accuracy

One common reason is when the IRS has questions about the accuracy of your previous year’s return. This might happen if they suspect errors in tax filing or are conducting an audit. In such cases, if the IRS changes your refund and you disagree, you generally have 60 days to dispute their decision.

Got it! But what should I do if I notice a mistake myself?

If you’ve discovered an error on your tax return or realized that you overlooked a beneficial deduction or credit, don’t fret. There’s a solution in the form of an amended return. The IRS provides a straightforward process for such corrections, allowing taxpayers to file an amended return using Form 1040-X.

2. Owing back taxes

If you owe back taxes, the IRS will typically apply your refund to this debt. This will happen even if you are under an existing payment plan. If you’re unable to clear your tax debt immediately or within the filing deadline, enter into a payment agreement, or an installment agreement, with the IRS. This will help minimize the imposition of penalties and interest, and help you avoid enforcement actions related to collection.

If you want to learn more about tax compliance, read our article about backup withholding.

3. Unfiled tax returns from previous years

If you have unfiled tax returns from previous years, the IRS can initiate a “delinquent return inquiry”. They will freeze your refund until you file all outstanding tax returns and pay any related tax bills.

Learn how to file your income tax return.

4. Issues with your tax account

Issues with your tax account, such as tax identity theft or discrepancies related to your dependents, also stand as reasons for refund withholding. Provide proof of your identity or resolve the dependent-related discrepancy, and the IRS will release your refund within a few weeks.

5. Owing other types of debts

Your refund can also be used to offset other types of debts:

• unpaid student loans,
• back child support,
• outstanding unemployment compensation repayments,
• state taxes.

In such scenarios, you need to engage with the entity to which you owe money, not the IRS.

Find out how to prepare your business for tax season.

Timelines at a glance: How long can the IRS hold your refund for review?

If everything is okay with your tax return, the IRS usually sends back refunds pretty fast. For most people, it takes less than 3 weeks. That’s because the IRS can quickly check most of returns and agree with the refund amount you asked for.

But, in case the IRS needs to take a closer look at your return, the review process can take longer. If they ask you for more information and you give it to them, they try to do everything within 60 days. So, if you have to wait a bit, it doesn’t mean something is wrong. They might just be making extra sure everything checks out.

And if you were a little late sending in your return or had to fix something, the IRS will get you your refund within 90 days.

Your refund, not as expected?

If the IRS finally issued a refund and it isn’t what you expected, a few different things might have happened. The IRS might have fixed something in your Recovery Rebate Credit or Child Tax Credit. Or, they might have used your refund to pay off old debts you owe. Usually, the IRS will tell you about these changes, and you can check to make sure they’re right.

Can I lower my taxes and get a bigger refund?

Yes, you can lower your taxes and potentially get a bigger refund. You can do so if you utilize tax credits like the Earned Income Tax Credit (EITC).

The EITC provides financial relief for individuals earning income from a job. It’s applicable whether you’re single, married, with or without children. This credit can reduce the federal taxes you owe. But if the EITC amount surpasses your owed taxes, the excess is returned to you as part of your tax refund.

Furthermore, even if you do not owe income tax, qualifying for the EITC means you can still receive a refund.

What to do if you’re still waiting for your refund

As you already know, most refunds land within 21 days of electronically filing. But delays might happen.

Checking on your refund, simplified

Navigating through the refund tracking process is straightforward with the IRS’s “Where’s My Refund?” tool:

• access the tool via the IRS website or the IRS2Go app,
• inputting your Social Security number, filing status, and the exact refund amount,
• view your refund’s status.

When is the right time to call the IRS?

Calling the IRS at 800-829-1040 is an option under certain circ*mstances:

• if it’s been more than 21 days since e-filing,
• if it’s been over six weeks since mailing your return,
• if the aforementioned tool directs you to do so.

Otherwise, you might be better off avoiding a potentially lengthy hold, as calling outside these conditions generally doesn’t yield additional information.

However, if the issues persist, you can contact the IRS Taxpayer Advocate Service. This is the independent organization within the IRS system that helps taxpayers solve problems with the IRS.

Getting your refund quicker next time

For a swifter refund in the future, consider e-filing. E-filing lets you bypass the slower manual data input that comes with paper returns. If you opt for direct deposit, your refund will land directly in your bank account or on a prepaid card.

Ensuring tax compliance for your business

Looking for tools that can help you and your accountant to go through the tax season smoothly? Time to try smart accounting automation!

Wrapping up

Understanding why the IRS refunds can be delayed is key to managing your taxes effectively. Delays can be due to issues like return errors, unpaid taxes, or old debts. Typically, simple returns take under 3 weeks, while complex ones might take 60-90 days.

To make the process smoother, ensure accurate filing, settle any debts, and use IRS tools. If things get tricky, consider professional advice.

Ever wondered what happens when you report someone to the IRS? Check out our article to find out how the process works.