There is no doubt that the IRS delays due to COVID-19 is causing considerable taxpayer stress. Before the COVID-19 pandemic, the IRS was issuing refunds and working through returns relatively quickly. They consistently responded to calls and correspondence in a reasonable amount of time. However, COVID-19 brought about a perfect storm of delays, initially caused by employees having to stay home. (Those lockdowns prevented processing centers from operating and workers from going to their offices.) But in most instances, IRS employees could not work from home due to the secure nature of their tasks. Not to mention the IRS’s rigid computer system and non-flexible workflows.
IRS Delays: Issue #1 – Economic Recovery (ie: Stimulus Payments)
Then Congress increase the IRS workload by making them responsible for distributing the economic recovery payments (stimulus payments). And not just once, but three times. Plus, Congress made retroactive tax changes, which required the IRS to modify already filed tax returns. Bottom line: it has been a rough couple of years for the IRS and accountants! And everything is taking a long time to both explain, and to catch up in the system.
IRS Delays: Issue #2 – Child Tax Credits
More recently, Congress mandated paying eligible taxpayers 50% of their child tax credit for 2021, estimated based on the 2020 return information, in six monthly installments from July through December. This places an additional burden on IRS resources, not to mention accountants.
For those who hadn’t filed their 2020 return yet, the third economic recovery payment and the advance child tax credit payments were based on their 2019 tax return. But as people filed their 2020 returns, the IRS needed to recalculate the amounts of the payments so that taxpayers weren’t shorted. These do-overs take away time that otherwise could be spent working through the backlog of correspondence and amended returns for prior years and processing the 2020 returns being filed on extension.
One of the IRS watchdogs, National Taxpayer Advocate Erin Collins, applauded the IRS in her mid-year report to Congress for processing most returns in a timely manner and issuing most of the economic recovery payments despite all of its added responsibilities.
IRS Delays: Issue #3 – Manual Verification
According to the advocate, the IRS did not have time to adjust its systems for the last-minute Dec. 27, 2020, legislation that made changes for the 2021 filing season. This required the IRS to manually verify the returns. Not for every return, but returns when a taxpayer elected to use their 2019 earned income to claim the 2020 earned income tax credit or the additional child tax credit. Unlike prior years, the IRS had to deal with a large volume of returns requiring manual reviews. At the end of the 2021 tax season, the IRS had over 35 million individual and business returns backlogged.
Relief on the Horizon
Slowly, the IRS is chipping away at the logjam. As of the end of July 2021, the backlog was down to 13.8 million returns.
So, if you are caught up in the gridlock, not much can be done except to be patient. But there’s some good news. If the IRS owes you a refund that’s been delayed, they’ll likely pay you interest at the annual rate of 3%.
There are just not enough IRS employees (or accountants!) to field all the calls about “Where is my refund?” Not to mention the time to respond to all the other tax related issues. Anyone who is able to get through to the IRS on the phone is lucky. Most people, including myself and all the other accountants out there, spend hours on hold and never get through.
We are not trying to make excuses for the IRS but just letting you know what the problems are. They will catch up, eventually. As will we! But in the meantime, EVERYTHING is taking a bit slower than normal and we are trying our best during the craziest tax season on record.
Patience Needed For IRS Delays
The entire office wholeheartedly thanks you for your continued patience while we work with the IRS to untangle the mess COVID-19 has left in its wake.
We can’t repeat enough how much we appreciate you and your business during these very trying times. Thank you!!!
Scott Nissen and the entire team at Nissen and Associates ~ 9-27-2021
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