The 2020 filing season was a challenge with the IRS closing down and sending workers home due to the COVID-19 pandemic. Tax season delaine was extended and many people rushed to get their taxes filed on time so they would receive stimulus payment lifelines dished out by the U.S. Government. One year later and we are seeing a great deal of pressure on the IRS to get refunds issued, send out more stimulus payments and to muscle through the backlog of 2019 return still yet to be processed. With the end of the 2021 filing season in sight many taxpayers are still waiting on returns to be processed and their refunds to be issued.
IRS Backlog of Tax Returns
Due to the COVID-19 pandemic and lockdown happening right in the middle of the 2020 filing season the IRS had no choice but to shut down and send workers home for their own safety. This resulted in a backlog of unprocessed returns. Repots stated that paper filed returns piled up in trailers outside the service centres waiting for IRS employees to return to work. As of December 2020 the IRS reportedly had a back log of approximately 11 million unprocessed paper returns. Today we are hearing of taxpayers who still have not had their 2019 tax returns processed some being told that their returns have been lost entirely. This is sad news for Americans who live overseas as they are eligible for the stimulus payments but often do not qualify to file their tax returns electronically.
The knock on effect is that 2020 tax returns filed during the 2021 tax filing season are also delayed. This is not entirely due to the previous year backlog, but also due to the tax law changes that came into effect for the 2020 tax year, in mid March. Many of the tax returns for 2020 were filed before the tax law changes were signed into effect and this saw many taxpayers and their tax advisers having to amend returns already filed. We must give credit where credit is due and the IRS has processed 91 million 2020 tax returns to date. The IRS is asking that taxpayers and tax professionals please do not submit duplicate returns or amended returns if not necessary as this will only add to the back log of unprocessed returns.
Stimulus Payments
In 2020 we saw the U.S. Government enact various laws that would provide financial relief to taxpayers struggling with the Global Pandemic. Two Economic Impact Payments (EIP or Stimulus) were issued to eligible taxpayers across the globe. These payments were based on your 2018 and 2019 U.S. Tax returns. Many taxpayers who were not up to date with their US taxes rushed to bring themselves into compliance especially Americans living overseas.
Unfortunately these taxpayers usually need to file on paper by mailing their return and so the wait has been long. A third EIP was agreed upon by the House and Senate as part of a further relief package and President Biden signed this into Law Mid-March 2021. Taxpayers again rushed to file their taxes early in order to receive the stimulus payments but there is a massive backlog of unprocessed returns at the IRS after having to calculate refunds from unemployment benefit exemptions and to verify the EIP payments issued and cashed in 2020.
IRS Processing and Refund Delays
Because of the late signing and implementation of the American Rescue Plan Act the IRS had no time to adjust it’s tax forms or update the computer system to accommodate the changes. At this time the tax season was already in full swing and at it’s highest peak. The changes were a neck breaker, for many, to say the least. This has caused a backlog of unprocessed tax return filed in the last few months and many who are eligible for refunds and a stimulus payments are waiting.
Last year in 2020 refunds were held up and many were understandable frustrated. This will be the second year refunds have been held up and the 21 day turnaround for refunds to be issued is simply not accurate.
The IRS released a news release to explain why refunds may be delayed but to summarise the most common reasons are:
- Errors on the returns
- Claiming refundable credits like the EITC or ACTC
- possible identity theft or fraud issues
- delays with the refund issued at the IRS and the deposit at the taxpayers bank.
Our advice is to check the Where’s my Refund Tool or the IRS2Go Mobile App to check on the processing of your return.
If the Where’s My Refund Tool asks you to contact the IRS then please, get in touch with a tax professional to assist you.