With the tax season in full swing, taxpayers may see another round of delays in processing. Last year, more than 30,000,000 taxpayers were denied their returns and refunds by the IRS.
In January, Treasury Department officials warned that the tax season this year would be difficult with IRS processing returns starting on January 24. This is due in part to the large backlog of IRS returns dating back to 2021. The IRS had 6 million unprocessed individual tax returns as of December 31. This is a substantial decrease from the 30 million backlog in May. However, it's still significantly higher than the 1,000,000 unprocessed returns that are more common around tax season.
This may cause taxpayers to be nervous about 2022 delays, but most Americans should receive their refunds within 21 business days of filing, according the IRS. According to social media posts, some taxpayers have already reported receiving their refunds.
On February 11, the IRS stated that it had issued $9.5 billion in refunds to 4.3 million people. On Monday, Charles Rettig, IRS Commissioner, wrote in a Yahoo Finance Article that millions of people are still waiting for their refunds to be processed. Rettig also pointed out that the agency still has the same staffing levels as the 1970s, despite the fact that the U.S. population has grown by 60% in the past 60 years.
There are some limitations to the 21-day time frame for obtaining a refund. The IRS stated that claiming the Earned Income Tax Credit and the Child Tax Credit may slow down your tax returns due to regulations that deter fraud. However, people who claim these credits and file their returns by January 24th or close to it could not receive their refund until March.
Other issues that could slow down your refund include math errors or incorrectly reporting the amount you received from advanced Child Tax Credit payments. These cases could result in delays of up to a month or more.
On February 14, the IRS stated that tax returns containing errors in the third stimulus check (missing information, suspected fraud or theft) could take between 90 and 120 days to resolve.
Taxpayers may accidentally claim the incorrect amount on their tax returns for this year, and it is not their fault. On February 14, the IRS stated that certain Child Tax Credit letters (letter 6419) contained incorrect information regarding the amount received by some taxpayers. The IRS asks taxpayers to refer back to the letter when they fill out their tax returns.
However, this could lead to the taxpayer's return not matching what the IRS has on record, which can cause the return to be flagged and delay in processing their return and getting their refund, according to Larry Gray, a CPA liaison for the National Association of Tax Professionals.
"People might not realize that the letter could have been wrong. What is the IRS doing to send a follow up communication to stop the IRS from creating more backlogs in the next season?" He spoke on conference call to address tax professionals' concerns regarding the current tax season.
Refunds available within 21 days after filing
If everything goes according to plan, however, taxpayers who file electronically can receive their refunds via direct deposits as soon as one week following filing. This is based on previous years processing times, according to CPA Advisor trade publication.
The publication noted that processing times tend to slow down when tax season begins and the IRS processes more returns.
Tax experts suggest that taxpayers take steps to ensure quick refunds. This is especially important since the IRS has a backlog. In January, Erin M. Collins, National Taxpayer Advocate, sent a report advising Congress that she is concerned about the "upcoming filing season" due to the backlog.
Mark W. Everson, former Commissioner of the IRS and vice chairman of Alliantgroup, stated that "The first thing to do if you're going to cook a dinner, is to clean up the kitchen." It just escalates to a horrible situation.
Collins stated that delays in processing tax returns are one of the most pressing problems at the agency. This was in her report. It describes an agency in crisis .
Americans are getting the message. According to a Bankrate.com survey of nearly 2,500 people, potential IRS processing delays rank second among the top three concerns of those who expect a refund this year. Worries about a lower refund than expected and a decrease in purchasing power due to inflation were the No. 1. and 3.
Experts believe that tax returns may be delayed
The IRS claims most refunds will arrive within 21 days. However, experts warn of delays and point out that the IRS is still processing 2020 tax returns.
According to IRS data, more than 240,000,000 tax returns were processed during the 2020 budget year. The IRS issued approximately $736 billion worth of refunds and $268 billion in federal stimulus payments. In that time, 60 million people visited or called an IRS office.
Donald Williamson, an accounting professor at American University in Washington said that he anticipates delays from the IRS for weeks and even weeks in 2022. "My advice for 2022 is to file early, get started tomorrow, and work with qualified professionals to put together your taxes."
To make matters worse, tax preparers said to CBS MoneyWatch that they still have difficulty reaching IRS staff by phone. Collins reported that the IRS responded to only 1 out 9 taxpayer calls in fiscal year 2021. Collins noted that many taxpayers are frustrated because they aren't getting the answers to their questions.
Christian Cyr, CPA, president and chief investment officer of Cyr Financial, said that in the past, it was possible to wait between 5-10 minutes before speaking with an IRS agent. He said that his CPAs now have to wait hours before speaking with an IRS employee. There is no guarantee they will ever reach one.
It is not easy to ensure smooth tax filing. Last year's average refund was $2,800. Here are some tips from IRS tax experts on how to get your tax refund within 21 business days of filing.
1. Send electronically
This is something the IRS strongly encourages this year. While some may prefer to file paper returns, others may not have a choice. However, the IRS says that electronic filing is more likely to get their returns processed quickly.
The IRS relies on computers for electronic processing of filed returns while paper returns must still be processed by humans. The IRS closed its offices in the early days after the pandemic and stopped opening mail, thereby putting off processing paper returns.
The IRS has not kept pace with the population growth, even if there have been some strains on employees due to the pandemic. Despite a 60% increase in population, the agency's workforce has remained the same size as it was in 1970. This means that there are fewer workers available to handle greater volumes of returns.
According to Taxpayer Advocate Service data, about 10 million people filed paper tax returns in 2017. This is approximately 7% of the total 148 million returns that were filed in 2021. Experts in tax urge taxpayers to join the approximately 138 million taxpayers already using electronic filing.
National Taxpayer Advocate Collins stated Wednesday that paper is the IRS's Kryptonite and the agency is still buried within it.
2. Get a refund via direct deposit
The IRS recommends that taxpayers arrange for direct deposit to receive their refunds. According to the IRS, the fastest way for you to get your money is to combine e-filing and direct deposit. This will send the money directly into your bank account.
Last year, refunds were received by approximately 95 million people. Direct deposit was used by 87 million. According to the IRS, most taxpayers who file electronically will receive their refund in 21 days, provided there aren't any problems.
3. Don't guess at the results
The IRS compares its data with the information taxpayers provide on their returns. An employee can flag a return for manual review if there is a discrepancy. For example, if your W2 shows you earned $60,000 but you claim that you earned $58,000, the IRS will flag it.
It's possible that your tax return will be delayed for weeks, or even months once this happens. Tax experts recommend that people carefully review forms to make sure they are accurately reporting the data. Cyr stated that you shouldn't rely solely on the word of mouth or honor system when filling out your tax returns. "I can guarantee that this will cause delays."
4. Keep IRS letters regarding stimulus and CTC in your files
In this vein, the IRS will send letters to taxpayers who have received the third federal stimulus checks in 2021 and advanced child tax credit payments.
These letters will inform taxpayers about the programs they received in 2021. They are very important documents that you should keep because they can be used to help you fill out your tax return.
Tax returns were delayed 2021 due to mistakes made by taxpayers in reporting 2020 stimulus payments amounts on their returns. This led to tax filings being flagged for manual review.
Everson said, "Don't let any problems arise from your own negligence."
The IRS advises taxpayers to check their IRS.gov accounts to verify the amount they received due to incorrect CTC letters being sent to taxpayers.
Two letters will be sent by the IRS:
Letter 6419 -- informs taxpayers about their advance CTC payments. These letters were first sent by the agency in December, and will continue to be sent in January.
Letter 6475 -- Concerning the third stimulus check. This letter will be sent in January.
Tax experts recommend keeping both letters close at hand and referring to them when you are completing your tax return.
These tax credits may cause delays.
Even if everything is perfect, there are still some issues that can cause delays.
The IRS states that refunds that involve the Earned Income Tax Credit or Child Tax Credit cannot be issued before mid-February. The IRS stated this week that the law gives the IRS additional time to prevent fraudulent refunds being issued.
If your tax return includes any of these tax credits, you might not get a refund even if you file on January 24th. The IRS has informed those who claim these credits that their refunds will likely be received in March if they file their returns by January 24, assuming that they did so before that date.
This is due to a 2015 law which slows refunds to people who claim these credits. It was created as a way to combat fraudsters who use identity theft to steal taxpayer's refunds.