(CBS Baltimore) – The May 17th tax filing deadline has arrived. In a typical year, a tax refund often follows a few weeks after submission, if not sooner. This is not a typical year. COVID and policies to combat its economic implications have put the Internal Revenue Service (IRS) far behind in processing tax returns. The backlog is likely to grow as filers rush to meet the upcoming deadline. And that could mean potential delays for tax refunds, especially for those who file paper returns.
Where is the IRS at?
The IRS has entered the current tax season with millions of pending tax returns from 2019 and before. Like most office workers, many IRS employees have had to do their work from home during much of the pandemic. The paper returns, which were in trailers awaiting processing, were inaccessible. As of March 5, the number of remaining reports received before 2021 stood at 2.6 million. A few weeks later, that number had dropped to 2 million.
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While the backlog of tax returns from previous years has decreased, the backlog of returns for 2020 has increased. A recent blog post by national taxpayer lawyer Erin M. Collins revealed the numbers. At the beginning of April, more than 8 million individual declarations had been placed in “waiting state”, awaiting examination and manual processing. (Suspension of returns does not tend to occur in a typical fiscal year.) Another 5.3 million paper returns from the past two years required manual processing, along with 4.7 million returns. with errors and possible fraud problems and 11 million trade and other reports. That total of $ 29 million rose to $ 31 million as the deadline approached.
Changes to the tax system have not helped
Many factors, most of which are beyond the IRS’s control, are contributing to the backlog. The Consolidated Appropriations Act, 2021, which included the second $ 900 billion stimulus package, contains a “look back rule.” This allows Filers eligible for the Earned Income Tax Credit (EITC) or Supplementary Child Tax Credit (ACTC) to use their 2019 income to determine the correct amount on their 2020 return. was passed just weeks before the start of tax season. The IRS did not have enough time to change the forms and adjust the computer systems. As a result, millions of forms have to be processed manually through their error resolution system.
Discrepancies with the rebate recovery credit have also been set aside for manual processing. This is the credit people can claim if they received less than what they were entitled to on their first or second stimulus check. The Inspector General of the Treasury for Tax Administration reported that about a third of those who applied for the refund recovery credit had their forms flagged for review.
IRS is overloaded and underfunded
Since early 2021, the IRS has issued the second and third economic impact payments, better known as stimulus checks. The second, up to $ 600, began rolling out at the end of December 2020, as part of the law on additional funds for coronavirus response and relief. The third, up to $ 1,400, began releasing in mid-March, under the American Rescue Plan Act. The IRS began accepting tax returns on February 12. So the last check was processed during tax season, its busiest time of the year.
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Collins’ blog post also cites limited resources and technological issues as the reasons for the delays in processing tax returns. The agency continues to operate under many of the same limitations that plagued office workers around the world during the pandemic. This includes working remotely, which can affect efficiency. The IRS is also understaffed and underfunded. Congress has continuously cut the agency’s budget over the past decade; funding is down about 21 percent.
An IRS watchdog has informed Congress that budget cuts limit the agency’s ability to keep up with technology and collect taxes. The agency has long relied on an old programming language called COBOL. This is not necessarily a problem, unless the code is not kept up to date. And the IRS hasn’t kept it up to date. So when stimulus checks or tax code changes arise, the agency has to find and pay programmers to fix things. The IRS launched a modernization effort in 2019, but it relied on future funding. President Biden is also looking to increase the agency’s budget by $ 1.2 billion in fiscal 2022. However, none of this looks likely to help this tax season.
What should you expect?
The IRS expects a total of 160 million tax returns by Monday’s deadline, many of which are still pending. As of May 7, 85 million of the returns submitted resulted in refunds, typically amounting to about $ 3,000. Continued delays in processing will likely mean longer wait times for tax refunds. According to the agency, electronically filed tax returns typically take around 21 days. Paper returns take longer in a typical year, and the growing backlog will further extend the lead time.
Delays can be inevitable. So many manual exams lead to extra wait times. But filing electronically and eliminating errors in a return may be a filer’s best chance of avoiding them. If you are requesting the remittance recovery credit, double checking the amount (s) received on the first and / or second dunning check can also save you time. Opting for direct deposit, rather than a paper check, for any reimbursement will also help. “There is no guarantee that the money will arrive tomorrow,” Collins said in an interview with CBS News. “They should plan accordingly for the continued delays.”
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Originally published May 13 at 3:04 p.m. ET.