Extreme delays in processing tax returns and tax refunds ranks because the No. 1 most significant issue going through taxpayers, in keeping with Nationwide Taxpayer Advocate Erin Collins’ annual report to Congress launched at the moment. It was robust final 12 months, and it appears prefer it’s going to be robust this 12 months, too.
The Inner Income Service introduced this week that the 2022 tax season submitting begin date—whenever you file your 2021 tax return—is Monday, January 24. In the meantime, tens of millions of persons are nonetheless ready for his or her 2020 tax 12 months tax refunds. And the taxpayer advocate is warning of refund delays this tax season.
“I’m deeply involved concerning the upcoming submitting season. Paper is the IRS’ Kryptonite, and the company remains to be buried in it,” stated Collins. How unhealthy was it final 12 months? Taxpayers confronted lengthy processing and refund delays, problem reaching the IRS by telephone, correspondence that went unprocessed for a lot of months, assortment notices issued whereas taxpayer correspondence was awaiting processing, restricted or no info on the The place’s My Refund? software for delayed returns and problem acquiring well timed help from the Taxpayer Advocate Service, an impartial group inside the IRS that Collins heads up. Final 12 months, TAS bought greater than 66,000 congressional referrals, six instances the pre-pandemic stage of inquiries.
Thousands and thousands of e-filed returns have been held up because the IRS issued math error notices due to discrepancies associated to 2020 tax 12 months stimulus funds. The most typical error (11 million returns) was round Restoration Rebate Credit score claims by taxpayers who didn’t get stimulus funds. The mismatch triggers a math error discover; a taxpayer’s response go into the paper pile; and any refund is additional delayed. Paper returns have been taking as much as eight months to course of, and there have been instances the place amended returns took greater than a 12 months to course of.
Thousands and thousands of discrepancies—and math error notices—stay probably this 12 months, too, Collins warns, as taxpayers must reconcile the third stimulus fee paid out in 2021 in addition to any 2021 month-to-month superior little one tax credit score funds on their 2021 tax returns. The kid tax credit score funds apply to nearly everybody with youngsters—36 million taxpayers. To keep away from tax refund delays, ensure you have IRS letters 6419 and 6475 readily available earlier than you file. File electronically and select direct deposit.
How unhealthy is the backlog going into this submitting season? The most recent Covid operations statistics, as of January 7, present that the IRS nonetheless had 6 million unprocessed 2020 particular person tax 12 months returns as of December 23, 2021. As well as, as of January 1, there have been 2.3 million unprocessed amended particular person tax returns, and as of January 5, there have been 2 million unprocessed employers’ quarterly tax returns (Varieties 941 and 941-X).
The IRS backlog contains about 5 million items of taxpayer correspondence—with a few of these submissions courting again at the very least to April and plenty of taxpayers nonetheless ready for his or her refunds 9 months later, in keeping with the Taxpayer Advocate report.
IRS submitting statistics as of December 3, 2021, confirmed 168 million particular person earnings tax returns processed. Of these, 77% have been issued refunds. Common refunds got here in at $2,815.
Tax refund delays trigger actual issues for folks, with a disproportionate affect on low-income taxpayers. “The monetary affect can vary from gentle inconvenience to extreme monetary hardship,” Collins says.
Collins says that the IRS “deserves credit score for enjoying the hand that it was dealt.” Congress has charged the IRS with administering Covid reduction—stimulus funds, superior little one tax credit and the $10,200 unemployment advantages tax exclusion. And the variety of taxpayers the IRS serves has been going up whereas the IRS workforce numbers and finances have been happening. Since FY 2010, the IRS’ workforce has shrunk by 17%, whereas its workload—as measured by the variety of particular person return filings—has elevated by 19%.
How can Congress assist? The Taxpayer Advocate requires Congress to beef up its funding to the IRS so it might enhance the taxpayer expertise and modernize its IT programs.
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