A long list of headaches facing taxpayers this year – including dramatic delays for many tax refunds – was outlined in a blog issued by the National Taxpayer Advocate.
It isn’t your imagination. Tax season has more than its far share of “bumps in the road,” as the blog released recently was titled.
Millions of taxpayers are waiting eight weeks or more for their tax refund cash. It’s a far cry from the 21 days or less that’s typically the wait for a federal income tax refund.
The Taxpayer Advocate Service is an independent organization within the Internal Revenue Service that’s designed to “ensure that every taxpayer is treated fairly and that you know and understand your rights.”
The National Taxpayer Advocate presents an “independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.”
The advocate acknowledged in the latest blog that the hurdles being faced by the IRS this tax season are sizable including the “pandemic, congressional directives and reduced staffing.”
“We understand the delays taxpayers have experienced this year have been largely unavoidable,” the blog stated.
But the taxpayer advocate also scolded: “The IRS can provide taxpayers with more specific information so they know what to expect and, where possible, they can make adjustments to manage their finances.”
Among other things, the blog noted:
You won’t get help by calling the IRS
As of April 10, IRS employees have been able to answer just 2% of the 70 million taxpayer calls to the IRS phone line at (800) 829-1040.
The IRS has reported an official “Level of Service” of 5%. So, the blog noted, that means only one out of 50 calls has gotten through to a person. And the taxpayers who managed to get through have waited on hold an average of 20 minutes.
“From a taxpayer’s perspective, it feels like their return has fallen into a black hole: They do not know what is going on, when they will get their refund, why it is being delayed, or how to get answers or help,” according to the blog.
Tax returns are pulled to the sidelines
The IRS is now holding more than 29 million returns for manual processing, according to the Taxpayer Advocate Service.
“As one would expect, IRS employees are stretched thin working through the manual processing of these returns, so if a taxpayer’s return is pulled for manual processing, there will be delays,” the blog stated.
That includes 5.3 million individual 2019 and 2020 paper returns; 4.7 million individual returns with processing errors or fraud identification issues requiring responses from taxpayers; and 11 million business and other returns.
Holding these returns has resulted in significant delays for tax refunds.
The blog noted that as of April 9, more than 8 million individual returns were in “suspense status awaiting review and manual processing.”
During a normal filing season, the blog stated, the IRS Error Resolution System “does not suspend returns, as it is able to review and process them as they come in.”
Some things are working OK
“On a positive note,” the blog stated, “the IRS has processed over 91 million 2020 Forms 1040, U.S. Individual Income Tax Returns, issued about 68 million refunds to date, and is in the process of delivering the third round of EIPs.”
Last week, for example, the IRS indicated that about 161 million Economic Impact Payments have been issued through last Wednesday since the latest stimulus program was launched in March.
And some people may receive more money in the near future.
After the IRS processes the 2020 tax return, if applicable, taxpayers should receive a supplemental stimulus payment this year.
“It is good news for taxpayers that the IRS will be making periodic payments throughout 2021 to ‘push up’ the third round of EIPs previously issued based upon their 2019 income tax return,” the blog noted.
By pushing the extra money into wallets this year, the taxpayer will not have to wait until filing the 2021 return a year from now to obtain the additional money.
Where are trouble spots?
The IRS acknowledged earlier that some delays can take place when someone files a Recovery Rebate Credit or if a lower income worker uses 2019 income, as now allowed, to claim an Earned Income Tax Credit on a 2020 return.
Those issues can trigger a manual review, according to the blog.
The blog noted: “Any inconsistencies between the IRS’s records for the EIP and the recovery rebate credit reflected on a taxpayer’s 2020 Form 1040 or Form 1040-SR, U.S. Tax Return for Seniors, require manual review and corrections before processing.”
The Consolidated Appropriations Act, 2021, signed into law on Dec. 27, included a lookback rule allowing taxpayers to decide if they want to use their 2019 income for the purpose of calculating their EITC or Additional Child Tax Credit on their 2020 tax return.
That change reflects the economic shock that many faced in 2020, compared with 2019. But the timing of the change was problematic for the IRS.
“Due to the late passage of the law, the IRS was unable to timely adjust its forms and computer systems before the start of the filing season to allow for systemic processing of returns where taxpayers elected to use 2019 income. Thus, the IRS had to create a manual process instead,” the blog noted.
Many early filers, of course, have absolutely no idea why they’re waiting and waiting for their tax refund money. The IRS first began accepting tax returns on Feb. 12. Information has been spotty about why refund money has been delayed in many cases.
The Taxpayer Advocate’s blog takes the IRS to task for not specifying the reasons why many returns would require further review and manual processing.
In addition, the highly promoted “Where’s My Refund?” tool doesn’t tell taxpayers very much.
“These tools only tell taxpayers that their return is being processed but fail to provide any details as to whether they need to provide additional information or when the refund will be released,” the blog noted.