Nearly 7 million tax filers are in limbo and facing substantial delays in getting refunds so far this tax filing season, as the Internal Revenue Service struggles to keep up with the demands of issuing stimulus checks and implementing myriad tax code changes from coronavirus relief packages, including the one President Biden signed this week.
There are 6.7 million returns that have not yet been processed, more than three times the number in the same period last year, when fewer than 2 million returns faced delayed processing, IRS data shows.
The delays are largely a result of a year’s worth of extraordinary stimulus measures that have created more complicated tax returns for millions of Americans. The IRS was already straining to adjust after the December stimulus package. The newest package, the American Rescue Plan, adds even more tasks for the agency, including sending out another round of one-time payments, making changes to tax rules to help unemployed workers and paying out a new child tax benefit.
Many Americans who did not receive the correct stimulus payments in January or last year are filing for additional money now. And some low-income filers are newly eligible for more tax credits than usual. The IRS is having to manually review a lot of these returns, a slow process that is delaying refunds for millions of low-income families, after the agency has faced a decade’s worth of budget cuts and staffing losses.
More than 100 people still waiting for the IRS to process their returns shared their stories with The Washington Post. Most filed electronically on Feb. 12, when the IRS opened tax filing season. They were eager to get their refunds and to update their information with the IRS ahead of the $1,400 stimulus payments going out. But a month later, many of these early filers are still waiting for their returns to be processed — and their refunds to be deposited.
“I’m supposed to get a $5,600 refund. I absolutely need that money, and the IRS just won’t give me any answers,” said Frances Johnson, a single mother in Burlington, Wash., who filed on Feb. 12 and needs the money to repair her car. “When I call, they say I will have to wait until the end of April.”
The main two issues to emerge so far this tax filing season are a large number of returns being sent for manual review and the malfunctioning of the popular “Where’s My Refund?” tool for weeks. The tool was fixed last weekend, the IRS confirmed, but the processing delays persist.
National Taxpayer Advocate Erin Collins has been urging the IRS to let people know why returns are delayed. She is also concerned that the processing delays could get even worse if millions of people who already filed their taxes have to file amended returns to benefit from the changes Congress just enacted.
For example, unemployed workers could see tax breaks, because Congress agreed to make the first $10,200 of unemployment benefits received from the government in 2020 nontaxable.
The backlog is severe for any tax return requiring a manual review by an experienced IRS staffer. Amended returns typically require a manual review, and many of the 6.7 million returns that have yet to be processed are also sitting in line for a manual review, according to Collins.
The IRS said that 36 million refunds have gone out so far and that the agency is moving as fast as it can to get stimulus payments out in the coming days, all while processing more returns.
“While the IRS issues most tax refunds within 21 days of the filing season start, it’s possible some refunds may take longer,” said IRS spokesman Robert Marvin. “Many factors can affect the timing of your refund after we receive your return. Some tax returns take longer to process than others. For example, returns with an error, incomplete information or those affected by theft or fraud may take longer to process.”
Marvin said the IRS would send taxpayers letters if more information is needed to process a return.
Jacob White is one of the frustrated Americans desperate for a refund to arrive, so that he can pay March rent. He and his girlfriend both filed their tax returns on the same day: Feb. 12. Her refund arrived two weeks later. He has not seen his, and the IRS reports that it is still “processing.”
An IRS call center agent told White on Wednesday that “over 7 million returns were sent to the Error Resolution System to buy time.”
“It’s just the wrong time for all of this. People need the money,” White said. “My rent and my car payment are due next week, and the electric.”
The Error Resolution System is the group involved in the manual review of returns. Most years, it deals mainly with returns that are flagged as potentially fraudulent, but this year millions of returns claiming stimulus money or involving the earned-income tax credit or the child tax credit have also gone to the error department. Most of these filers are low-income families who lost a job or who had a new baby in 2020, and should have received stimulus checks based on those events but did not.
“We had a 2020 baby, and we also had our income drop in 2020, so we claimed that we had missed out on some stimulus,” said Caitlyn Primiano, who lives in Syracuse, N.Y., with her husband and five children. “The IRS is telling everyone like me that their returns are in the 'review and errors’ department and to expect 10 weeks.”
The other problem is that Congress said low-income tax filers could use either 2019 or 2020 income to qualify for the highest possible tax credits for children. IRS systems have struggled to handle two different years of income qualification.
Current and former IRS staffers say it was inevitable that something would go awry since there are not enough employees to handle the workload, especially with Congress adding more tasks.
The IRS had its budget slashed by 20 percent from 2010 to 2019, and staffing is down by 23 percent — or more than 22,000 positions, according to the Government Accountability Office.
“At some point when you take so much money out of an agency, it will do less with less, and that’s showing up across the IRS — from the time it takes to process a return to how many calls it can answer to lower enforcement,” said Chye-Ching Huang, executive director of the Tax Law Center at the New York University School of Law.
The IRS “has gone from being solely a tax administration system to also implementing social programs,” Collins said in an interview. “The IRS will get it done, but at what cost?”
Collins said the consequences for the nation’s tax filers include slower processing of returns and less help from taxpayer assistance services, since fewer staffers are available to take calls and look at returns. Most IRS employees are already working mandatory overtime, she noted. While the American Rescue Plan provides about $1.9 billion in additional funding for the IRS, it takes time to hire and train employees to work with sensitive data.
The mounting backlog at the IRS — and the lingering burdens created by the coronavirus — have led some Democratic lawmakers to call on the agency to extend the filing deadline beyond April 15, as it did last year.
Rep. Bill Pascrell Jr. (D-N.J.) even asked the IRS formally in a letter last week to push the tax filing deadline to October. But the lawmaker, who chairs an oversight panel with the House Ways and Means Committee, said Friday that he had not heard back, setting the stage for a tense clash between lawmakers and the agency when IRS Commissioner Charles Rettig testifies at a hearing next week.
“If they don’t answer me by then, I don’t think that’s going to be a pretty discussion,” Pascrell said, adding that the agency generally “has to do a better job.”
Sen. Ron Wyden (D-Ore.), the chairman of Senate Finance Committee, pledged that his panel would provide vigorous oversight of the IRS as it implements the new stimulus law, starting with an expected hearing featuring Rettig in early April.
Wyden said lawmakers seek a “concrete work plan” from the agency as it embarks on a process to implement vast changes to the tax code that would provide new aid to jobless workers and families with children.
“We are making this clear to the IRS, we want this done as soon as possible,” he said.
Yet millions of Americans are still waiting on their refunds.
“It’s just so frustrating,” said Jason Weiler, who works in the film industry in Los Angeles and was counting on money from the refund and the latest stimulus to plug a hole when his latest gig ends shortly. “The IRS told us to get these in, but what do we have to show for it?”