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Delays on processing Individual Tax Returns and Tax Refund from the 2019 and 2020 Tax seasons.

According to the IRS report from May 6, on the partial results of the 2021 Filing Season, the Treasury Department still has millions of returns to process. By the end of 2020, the agency still had a backlog of over 8 million individual returns (2019), which over 3.5 million were individual paper returns and almost 1.5 million were amended returns.

There are several reasons for the backlog. For one, according to the report, the agency employs 15% fewer employees than it did a decade ago, so there are fewer people to process returns. And it also has over 4,400 unfilled positions in the processing department.

In addition to processing normal returns from last filing season and this filing season, the smaller staff has had to distribute hundreds of millions of stimulus payments over the past year, implement other recent tax law changes like the increased Child and Dependent Care Credit and send out tax refunds on 2020 unemployment benefits to those who already filed their 2020 returns.

Paper returns have been delayed because IRS staff was not physically in the office for much of last year to process them due to Covid-19 social distancing measures. With staff returning, the amount of paper returns from 2020 left to process fell from 3,540,486 to 2,144,347 as of March 20, 2021.

Another reason for the backlog is a lack of working computers and printers at IRS offices, the report says. In the Kansas City, Missouri, Tax Processing Center, for example, just only three out of the 10 printers and copiers were working at the end of March.

“These devices are needed to make copies of tax returns to fulfill requests for tax documents from taxpayers and other institutions,” the report reads. “The employees we spoke with were concerned that they would have a work stoppage if these remaining devices became unfunctional.”

Delays in processing refunds have continued into this tax filing season, with millions taking longer than the typical 30 to 45 days, according to the National Taxpayer Advocate.

Phone calls to the IRS

As taxpayers wait for their refunds and stimulus payments, they have made nearly 46.3 million phone calls to IRS assistance lines, per Treasury’s report. Just 4.4 million — or 9.5% — have been answered by an actual human. And those who did get to speak to a human had to wait on hold for 18 minutes, on average.

Throughout the Covid-19 pandemic, the IRS has said not to call in to helplines, as the agency had closed Tax Processing Centers, Taxpayer Assistance Centers and other offices due to Covid concerns. Instead, it has encouraged taxpayers to use the Where’s My Refund? tool on its site for updates.

Tax Refund from the 2020 individual tax returns

At the end of the 2021 filing tax season, May 15th, 2021, the IRS had a backlog of 35 million tax returns that still needed to be manually processed: 16.8 million paper returns and 15.8 suspended for further review and duplications. These figures are almost three times larger than the same on last year. Tax Refund should not be expected in the normal 6 weeks period.

“For taxpayers who can afford to wait, the best advice is to be patient and give the IRS time to work through its processing backlog,” wrote Erin Collins, the National Taxpayer Advocate, in her report to Congress.  “But particularly for low-income taxpayers and small businesses operating on the margin, refund delays can impose significant financial hardships.”

2021 IRS Challenge

The 2021 tax filing season started late and was extended an extra month due to the coronavirus pandemic. To make matters worse, the agency was inundated with phone calls and unable to keep up. During the 2021 filing period, the IRS received 167 million phone calls, four times more than during the 2019 season. As a result, only 9% of calls were answered by a live customer service representative. The popular “1040” line, the most frequently dialed IRS toll-free number, received 85 million calls during the 2021 filing season, with only 3% of callers reaching a live person.

The IRS has also issued about 475 million economic impact payments totaling $807 billion in three separate rounds over the last 15 months. The agency also was tasked with managing monthly advanced child tax credit payments starting July 15.

Our figures, our clients.

Very few of our clients have received the 2020 refunds up to now. According to the IRS, they have processed less than 10% of the tax returns that US Tax Consultants have prepared during 2021.

Claiming the Recovery Rebate Credit, in the 2020 Tax Returns, we have noticed that a very large number of our clients have not received the second Stimulus Check of $600, only those receiving Social Security Benefits have received both checks, from the Trump administration.

Around 71.94% of our clients are claiming a Tax Refund of $2,560 (average). Only 23% have received the first two Stimulus Checks (EIP1: $1,200 & EIP2: $600) or they were not eligible for the Stimulus Checks and the result of the tax return is cero.

Summary

Based on the information that we receive directly from the IRS and from the monthly reports that the Treasury Department issues, we estimate that we all must wait until next year for the IRS to solve their internal challenges and get them up to date with the past tax returns and Tax Refund. The IRS will continue having some delays and they recommend (1) being patience, (2) do not call them to find out about the refunds and instead using the IRS tool Where is my refund? and (3) do not send duplicates of the returns if the first one has not yet processed.

Please do not hesitate to post your coments and the dates when you have received the different refunds so other Tax Payaers could estimamte how long more they should wait.

Antonio Rodriguez – US Tax Consultants