It’s been no secret that the IRS has been underfunded – not to mention under-staffed – for quite some time. Yes, this is a problem in part brought on by the COVID-19 pandemic. However, it’s also an issue that has been brewing for years.
All of this seemed to come to a head earlier in 2021 when unprecedented delays and enormous backlogs prevented millions of people from getting critical refunds. Things got even worse if you were a taxpayer who needed to file an amended return for whatever reason. According to the IRS website, it could take more than 20 weeks to have that return processed. Although experts at the National Taxpayer Advocate (NTA) indicated that those delays were “considerably longer” than what the IRS was willing to admit to.
What’s Going on at the IRS?
All told, the situation is slightly more nuanced than a lot of people give it credit for – although it’s still undoubtedly a cause for irritation regardless of the reason. The tax law has been in a constant state of flux in recent years, which makes it difficult for even IRS officials to keep up. As stated, a lack of manpower and critical funds is also partially to blame. The COVID-19 pandemic saw the tax filing date in 2020 change from April to July, only to see it revert back to April again in 2021 – essentially giving the IRS less time to perform a job that they needed those critical months for, to begin with.
Things have gotten to the point where the National Taxpayer Advocate is actually coming right out and admitting that there is little that they can do to help people who have been affected by this issue. In fact, they’ve made the almost unprecedented decision to cease accepting new cases where the issue to be resolved has to do with the processing of amended returns. The implication of this move is clear: there just really isn’t a point.
The NTA wrote, in part, “until the IRS processes a tax return, we cannot assist the taxpayer.” That will not come as welcoming news to the millions of people who are impacted by this ongoing problem.
Some believe that these refund delays are being caused by situations that were unique to 2019 and, by association, 2020. In theory, experts agree that this means you may likely receive a refund for 2021 prior to getting your check for the previous years – assuming that you file taxes in 2022 as normal, that is.
On that subject, financial experts do still recommend filing your 2022 taxes on time and in full if possible – even if the processing backlog and related delays continue. At the very least, it will enable people to avoid a late filing penalty and interest accrued on any money that may be owed to the federal government. Not only that, but when things do return to normal at the IRS – whenever that may be – it will help make sure that your return is processed as quickly as possible so that you can get that return as soon as you’re able to.
The IRS is legally obligated to pay interest on any refunds they sends out late.
So while millions of returns are delayed, when they finally do hit bank accounts they’ll be a bit bigger than they would’ve been had they been paid out on time. And that’s on top of refunds being 11 percent bigger this year than last, $2,775 versus $2,495.
Interest starts to accrue from the original filing due date of April 15, but it’s not owed on returns received 45 days or less after that date. Once a return has been delayed that long, it’s paid out at a quarterly adjusted rate of three percent more than the federal short-term rate. In the fourth quarter of 2021, the interest rate is three percent.
That doesn’t add up to a ton of money for most people, but it’s certainly better than waiting too long to receive your tax return and getting nothing for the trouble.
What can taxpayers do?
Unfortunately, there’s not really a way for taxpayers to get their tax refunds faster. Long term, properly funding the IRS is the only way to ensure that widespread delays like this one don’t continue to happen. In the short term, with IRS call centers overwhelmed, the only thing you can do is check the Where’s My Refund? on irs.gov and cross your fingers that your return will come soon.