Commonsense CPA: Dude, Where’s My Refund?

Thanks everyone for a successful tax season! We’re proud to have filed over 700 tax returns for our clients. Big shout out to the hard-working Harmony Tax Team.

With the April 18 tax deadline already in the rearview mirror, many of our clients might be eyeing their mailbox or bank account, wondering when that refund check is going to land. If you worked with your Harmony advisor to file your taxes before the deadline (without an extension) and are expecting a refund, the waiting game begins.

The IRS, at the onset of the tax season, confirmed the traditional refund timeline to early and electronic filers: expect your tax refunds typically within a three-week span. However, refunds are trickling out a tad slower this year. By April 7, the IRS had pushed out 69 million refunds, marking a drop of 1 million from the same milestone during the 2022 tax season.

Now, if we filed a paper tax return on your behalf, brace yourself for a wait. The IRS has cautioned that it could take a half-year or even longer to process your return.

If you’re wondering what the status of your refund is, the IRS has a handy tracker, that can be found here. At Harmony we can assist in preparation and filing of your tax return but once filed, the timeline of any refund is solely in the IRS’s hands. If it’s been more than 21 days (or six months, if you mailed your return) and you’re unsatisfied with the answers from the tracker, call the toll-free IRS refund line at +1 (800) 829 1954.

If you're anticipating state tax returns from the District of Columbia, Maryland, or Virginia,  timelines can vary based on the specific state and method of filing similar to your federal return. If you're in the District of Columbia, you can check the status of your return on the DC Office of Tax and Revenue's website, which generally processes e-filed returns in up to six weeks. For Maryland taxpayers, the Comptroller of Maryland's website offers an online tool to check your return status; e-filed returns are (allegedly) processed the same day, while paper returns can take up to 30 days. If you filed in Virginia, visit the Virginia Tax's website; electronic returns are processed within a week while paper returns can take up to six weeks. 

If you filed in another state, a link to all the relevant tax agencies can be found here. 

Here’s a reminder for many small business owners that tax season is never truly over and it’s never a bad time to review our primer on Estimated Taxes (especially if you had a surprise at last year’s tax deadline).

Thanks again to everyone for a successful tax season, we were glad to have the opportunity to assist in filing your taxes.

Journal Entries

Inflation Cooling but not Cool…

At the Commonsense CPA we remain on the inflation beat and the good news is that inflation in April experienced a slight decline (for the tenth month), with the consumer-price index showing a 4.9% increase compared to 5% in March. This trend will likely encourage the Federal Reserve to pause interest-rate increases at its upcoming meeting. The Fed has been actively raising rates to combat inflation, aiming for a 2% target but the blunt instrument has caused widespread damage expressed in regional banking failures and some non-lagging indicators. Despite some positive indicators, there remains a risk that rates will need to remain high for longer than anticipated. Core prices, excluding food and energy, rose 5.5% from a year earlier, indicating that inflation is still influenced by strong shelter costs.

Trapped at Home due to Pandemic (Interest Rates)

The American housing market in many areas is still seeing high prices with low mortgage rates essentially trapping many homeowners in their current homes, as they are unwilling (or unable) to give up these rates for higher ones on the market. This "rate lock-in" effect is keeping housing supply low, and a prime contributor to highly competitive and expensive market conditions. People who want larger homes are hesitant to abandon their low-interest fixed mortgages for new ones with rates nearly three percentage points higher. As of March, about two-thirds of primary mortgages had an interest rate below 4%, and roughly 73% were fixed for 30 years. This trend is causing stagnation in the market, making it increasingly difficult for first-time buyers to find homes, a problem exacerbated by historical lows in housing supply which is countering any decrease in demand to keep prices high. 

Debt Ceiling Showdown 

The debt ceiling showdown is once again center stage. If the government defaults on its debt, the effects could be disastrous, particularly as the economy already teeters on the edge of a recession. Despite the impending threat of reaching the X-date, the day when the government might run out of cash to pay its bills, the stock market has maintained its stability, but signs of caution are emerging among investors, including a retreat from government debt that matures around the X-date, increased cost of insurance against government default, and a rise in gold prices. These cautionary signals are a canary in the gold mine so we are rooting for a deal sooner than later.