Go With the Flow…
If you were hoping your federal tax refund for 2020 would arrive at the speed of light, you may want to adjust your expectations. It’s more of a glacial pace.
Why? The short answer is that tax agencies are backlogged, and there’s not much we can do about it.
A recent report by Accounting Today cites a bottleneck of 16.8 million paper tax returns waiting to be processed. But wait–it gets even more painful. Only 7% of taxpayers with questions or issues were able to reach assistance when calling the IRS. Wait times continue to be extremely long, and it’s been reported many phone-ins are not going through or getting disconnected. Dial down your frustration…it’s not just happening to you!
There are tens of millions of individual and business tax returns stuck in the ice jam because they require manual processing since taxpayers elected to use 2019 to claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). This was out of the ordinary and a real downer (slow-downer, that is) for the IRS.
Between having to shut down during the pandemic and then dealing with the unending cycle of new tax initiatives, three rounds of stimulus checks, amended returns, verifications, and manual reviews, the IRS couldn’t achieve anything faster than a slow roll.
Now, tax preparers are tasked with the job of keeping their clients cool, calm, and collected by explaining just why their refunds may be delayed. Returns are also getting stuck in the mud because of submission errors, an ID theft or fraud flag, or the presence of an 8379 Injured Spouse Allocation.
Other bumps in the road included computer-generated notices that did not correlate with returns. Irrelevant notices were sent out to taxpayers, causing even more confusion. Those applying for the Recovery Rebate Credit may experience slowdowns if the IRS disagrees with the credit calculated on the return. Having to file a paper return in cases like these extends the processing time even more.
Thus far, the IRS has processed about 136 million individual income tax returns and issued 96 million refunds totaling about $270 billion during the 2021 filing season. Supposedly, this is not too far off the last “typical” filing season in 2019, and they are making progress, slowly but surely.
So, while we understand the need for speed while waiting for economic recovery and refunds, all we can say is you should have your refund by the next millennium!