Each year, the IRS issues a Refund Cycle Chart. The purpose is to give tax preparers an idea when to tell clients to expect their refund. And believe me, that's a question almost every client asks.
I wondered with this being the final year of modernized e-file (MeF) phase-in if we would see a change in the chart. We've been told for years that returns processed under the new system could see a direct deposit within 5 business days. And I have heard from a few clients that they did get their refund sooner than I said they would. My problem was that there was no way for me to know how the return was processed, legacy or MeF. Unless that info is added to the acknowledgement I receive from the IRS, the only way to know which system was used is to continually check for acknowledgements. MeF returns are supposed to be accepted within minutes not hours.
The refund chart makes it looks like the IRS is keeping the batch processing format. Batch processing is the IRS's procedure of only starting to process returns once a week. In 2011, a return that came in on Monday sat until Thursday when processing began. MeF is suppose to end that for most returns. Processing will begin as soon as the return is accepted. The chart isn't showing a change in that process.
There are a couple of changes in this year's refund chart. The first is that the cut off has moved from Thursday to Wednesday. The IRS projects the direct deposit refund to be a week later (5 business days.) So, a taxpayer who's return was accepted on January 17 th or 18th should see a refund deposited on January 25th. BUT a return accepted on January 19th will not be deposited until February 1st. That's 10 business days. (That's because of batch processing. a return accepted by the January 25th cutoff time will get their refund on the 1st also.) Hopefully in practice, the January 19th filer will see a deposit much sooner and the chart will be mostly for returns processed under the old system. We'll see. But moving the deposit day from Friday to Wednesday could be a big help to some taxpayers. Because of the time a bank can hold a deposit before they will let the account holder draw against that money, many taxpayers knew they had the refund in their account but had to wait until Monday to touch the money. The new system won't change the holding but the earlier in the week deposit may mean that taxpayers can access their money in time for the weekend.
The second change is that the IRS has cut the processing time for refund checks. For as long as I can remember, a paper check ran a week behind the direct deposit. Refund checks are mailed on Friday for first of the week delivery. The Friday mailing hasn't changed but it's a week earlier. Direct deposits are released on Wednesday and checks are mailed on Friday.
I'm hoping that this chart is just a guide and that clients get their direct deposits on the 5 business day time frame not this batch processing timing.
The 2012 chart can be downloaded here.