If you are one waiting for your tax refund check from 2020 you are not alone. And 2021 does not look any better especially if you file a paper return.
According to the Washington Post, see article here, nearly 24 million taxpayers are still waiting for the Internal Revenue Service to process their tax returns from last year with many refunds being held up for 10 months or more. Typically, the IRS carried 1 million returns into the next season.
The delay is the result of many factors. During the coronavirus pandemic productivity at the IRS decreased as thousands of employees worked from home without access to returns, audits, and other business. In addition, the federal stimulus measures added to the agency’s workload. Adding to the problem is the fact that the IRS funding has decreased 20%, adjusted for inflation, since 2010. Computer software systems are aging, and the lack of funding has failed to modernize them. Throw in the same challenges as many industries across the country– people on are not applying for the available jobs at the IRS and the result is IRS backlog!
This 24 million outstanding individual and business returns requires what the IRS calls “manual processing” — an operation where an employee must take at least one action rather than relying on an automated system to move the case. This included paper returns awaiting processing, returns that were suspended because of errors with stimulus payments, pandemic relief, amended returns and correspondence between the agency and taxpayers requiring action to resolve issues before the returns/refunds can be processed.
If you file your tax return electronically, those are generally processed quickly unless they are flagged for errors, identity theft or other issues. However, roughly 10 percent—about 17 million people—still file a Form 1040, the traditional income tax return, on paper. Acknowledging that the IRS is taking at least 10 months to process paper returns filed for the 2020 tax year and has caught up only to April 2021 for returns with errors, it would be wise to file your electronically to avoid delays on your 2021 tax return.
Now for some good news. The IRS has announced the suspension of more than a dozen letters, including the mailing of automated collection notices normally issued when a taxpayer owes additional tax, and the IRS has no record of a taxpayer filing a tax return. The automatic notices have been temporarily stopped until the backlog of unprocessed tax returns is worked through. For a complete list of these suspended notices click here. The IRS is also considering suspending tax collections and excusing some penalty enforcement.