National Tax Advocate Cites Possible Reasons for Tax Refund Delays
In intervening on behalf of US taxpayers, the House Oversight and Reform Subcommittee held a hearing to investigate the delays in the release of tax refunds. Last April 21, Erin Collins of the National Taxpayer Advocate appeared in the Congressional hearing to give insights as probable reasons why many American taxpayers have not yet received their claims for tax refunds. Although taxpayers have been instructed to use the “Where’s My Refund?” tool at the IRS website, use of the tool only confirms that nothing has changed regarding the status of their refund claims.
According to Ms. Collins, the IRS “Where’s My Refund?” tool took in more than 632 million complaints last year plus the additional 300 million more filed this year. She explained that taxpayers who are not receiving any feedback or useful information via the tool, are those whose tax returns got snagged in certain processing delays. The IRS reported that as of the moment, 3 million 2020 tax returns in addition to 3.6 million amended 2020 returns, all from last year’s tax season, have not yet been processed; denoting any claim for refunds are yet to be reviewed and verified. This 2022 tax season, 9 million 2021 tax returns have yet to be reviewed.
There are also about 5 million previous year returns still pending final processing, since taxpayers have not yet resolved specific issues pointed out by the IRS.
Backlogs Prevent System from Processing New Paper Returns
Miss Collins explained that many of the problems involve paper returns from last year, which form part of the huge backlog that the IRS has to address. New returns cannot bypass older returns included in backlogs. The processing system of the IRS office requires addressing backlogs based on the applicable year the paper return was filed. If a taxpayer’s 2020 paper return has issues and has not been resolved, the processing of his 2021 paper return filed in 2022, will not move forward until the 2020 tax filing problems have been resolved.
Examples of Processing Delays
Citing examples of reasons for the processing of delays in both e-filed and paper returns, Ms. Collins mentioned that the most common errors include:
1. Errors in the calculation of Recovery Rebate or Child Tax Credit. In a related blog post, Ms. Collins reported that of the 9.4 million notices for mathematical errors sent by the IRS on April 7, 8.3 million pertained to Recovery Rebate and Child Tax Credits. To prevent the errors from becoming backlogs, the IRS imposes a 60-day expiration date that taxpayers must heed in contesting the adjustments to correct the mathematical error.
2. The tax return filed has missing information, for which the IRS will send a formal letter stating the missing information.
3. Specific returns that the IRS suspects involve fraud or identity theft. If that is the case, the IRS will also send a formal letter requesting documents to support the concerned taxpayer’s identity.
Ms. Collins said the IRS gives advice that it will take about 90 to 120 days to resolve these kinds of issues and is dependent on the quickness and accuracy of a taxpayer’s response. In certain cases, the training and ability of the IRS staff to work while observing social distancing requirement can also be a factor that could cause delay.
Readers who are not familiar with the “Where’s My Refund” tool in the IRS website will find useful information in an article published by Afri Bank Online about IRS tax topic 152 refund information on transcript.