Here’s why it will take even longer for the IRS to process backlogged, delayed tax returns and refunds

Millions of Americans are still owed tax refunds by the IRS, but the agency insists it’s making progress. The IRS was crushed by staffing issues, regulatory changes around 2020 tax filings this year, and technical issues. At this point, the Internal Revenue Services says it can clear the 2020 tax return backlog by the end of 2021. 

However, as an October 15 tax filing extension deadline arrives — the IRS expects another 4 million returns. That’s right. The agency that has struggled to catch up will get hit with millions of additional tax returns — likely leading to even more processing and refunds for American taxpayers.

How many tax returns does the IRS still have to process?

As of October 2, the IRS had 6.8 million unprocessed tax returns. That was down from 7.6 million in late-September. At one point, the IRS faced a backlog of over 30 million unprocessed tax returns — and while the agency has made impressive progress since August — it doesn’t mean the wait is over for those waiting on refunds.

“They’re just totally overwhelmed,” Claudia Hill told Forbes recently. She’s an enrolled agent located in California, helping clients sort out IRS math error letters, processing extensions, and returns. Tax experts say the next 90 days will be critical to the agency’s ability to kick off 2022 successfully. 

Has the IRS been transparent about tax returns and associated issues?

Americans are split here. While some feel like they have had a smooth experience with the IRS anecdotally — transparency advocates say more needs to be done. “Taxpayers need greater transparency regarding return processing,” the National Taxpayer Advocate wrote in a September blog. 

Meanwhile, those hard hit by the economic realities of the coronavirus pandemic have been left feeling missed by the IRS. “I still haven’t heard anything,” Shelly Ashnault told FingerLakes1.com. She’s been waiting since April for her tax return. “I’ve called several times with mixed results. It’s become a part of my weekly ritual. I’m not looking for a handout — I’m looking for what I overpaid in 2020.” Millions of Americans are waiting for refunds based on unemployment overpayment. The American Rescue Plan changed how much unemployment was subject to income tax. In Ashnault’s case though, it’s just ordinary income. 

“I’m pretty ordinary in every way,” she added speaking with FingerLakes1.com earlier this week. “I don’t have excessive income, but I overpaid, they admitted as much when I went through the tax return process, and am owed nearly $3,000. That’s my money and I’m not confident that if it rolls into next year that the IRS has the ability to get it right.”

That skepticism has been shared across the U.S., as millions wait for tax refunds. “The messaging has been mixed — depending on what representative I get. Some say they know nothing, others say they are working as quickly as they can.”

Here are some IRS tools and resources available to check the status of your return or refund:

How long will it take to send checks after IRS processes tax returns?

The IRS says it could take upwards of 120 days to process tax returns once they have all the information they need. The same can be said for those filing this week via extension. Typically, it takes around 21 days to process. But this year is anything but typical. 

If you’re filing this week — necessary refunds should be hitting bank accounts by December or January, which coincides with the end of the year — and start of the next tax season.

Here’s another thing: The IRS isn’t processing anything in chronological order. So, if you have other open claims or issues with the IRS — there’s good chance resolutions come at different times. If you’re receiving child tax credit advance payments — those likely won’t be impacted by filing late this week.

Another issue with unresolved tax returns from 2020 involves the staffing issue. The IRS says it depends on how accurate return information is, and the ability of IRS staff trained and working under social distancing requirements to complete processing. 

Other reasons for delays include:

  • Your tax return has errors.
  • It’s incomplete.
  • Your refund is suspected of identity theft or fraud.
  • You filed for the earned income tax credit or additional child tax credit.
  • Your return needs further review.
  • Your return includes Form 8379 (PDF), injured spouse allocation — this could take up to 14 weeks to process.

There are IRS tax refund status codes to keep in mind, too. Here’s what they mean:

  • Received: The IRS now has your tax return and is working to process it.
  • Approved: The IRS has processed your return and confirmed the amount of your refund, if you’re owed one.
  • Sent: Your refund is now on its way to your bank via direct deposit or as a paper check sent to your mailbox. (Here’s how to change the address on file if you’ve moved.)

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