Certain items are beginning to look like lousy bets this spring. Placing a wager on Gonzaga University or the University of Kentucky reaching the NCAA men’s basketball tournament’s Final Four. I was under the impression that Tom Brady would genuinely retire from football. Imagining that no one would remember the Oscars in 2022.
Many people, plain and simple, should not count on receiving refund money quickly, as the Internal Revenue Service reminds taxpayers once again not to rely on “receiving a return by a specific date, particularly when making significant purchases or paying payments.”
The IRS has compiled a list of reasons why refunds may take months to process, even if you file electronically, including instances of identity theft.
Without a doubt, approximately 51.8 million taxpayers have already received tax refunds this year, as of March 18. This is an increase of 4.1 percent.
So far, the average refund has been $3,305 – up 12.9 percent from the same time last year. Since the start of the tax filing season on Jan. 24, $171 billion in refund money has been distributed.
Numerous tax professionals and first-time filers inform me that they received their federal income tax refunds within two weeks of electronically filing. That is some encouraging news.
Of course, the IRS found itself in an absurd tangle last year with refund delays — a mess that has continued to stymie returns.
As of early February, the IRS had a backlog of over 17 million processing tax returns from last year – including 10.8 million unprocessed individual returns, according to testimony before the Senate Finance Committee by Erin Collins, the national taxpayer advocate. This statistic includes paper returns as well as some electronically filed returns that were suspended during processing, frequently owing to return errors.
Collins told the Free Press that millions of taxpayers may endure significant delays this year as a result of the IRS’s inventory backlog being pushed over into 2022.
The backlog is extensive and comprises initial returns, modified returns, individual business returns, and communication.
“They’re still processing those returns before they begin addressing some of the concerns and issues raised by this (season’s) tax return,” Collins explained.
Collins stated that 77 percent of all individual returns processed last year resulted in refunds.
According to her, processing delays often result in refund delays, which can result in financial hardship for some, including evictions, electricity shutoffs, and an inability to purchase necessities such as groceries and medicine.
What types of errors are made when it comes to stimulus payments?
One potential source of contention: Did you disregard the fact that you got any money last year? Or did you miscalculate the amount of money you received? And now, on a 2022 return, you’re claiming the recovery rebate credit?
Or are you underreporting the actual amount of money you received in 2021 for advance child tax credit payments?
The IRS continues to detect errors in claiming the recovery rebate credit — as well as the child tax credit — and warns taxpayers of potential delays. Some of these difficulties may take many weeks to address.
Someone may forget that they received money last year and then attempt to claim the recovery rebate credit on their 2021 return.
One taxpayer informed me that he believed he was not paid his third Economic Impact Payment of $1,400 last year. He then filed his return and claimed the recovery rebate credit, which the IRS accepted via electronic filing on Feb. 23. He anticipated a $2,200 tax refund.
He checked his bank statements again and discovered an auto-deposit for $1,400 in early 2021.
Should he submit an amended return now, claiming a debt of $1,400, and then send the IRS a check? He couldn’t fathom the IRS merely reducing his refund from $2,200 to $800.
However, what if he sent an amended return along with a cheque, what would happen if the IRS issued the modified refund? How would he reclaim the $1,400?
This is not an unusual misunderstanding – one that, according to Mark Steber, chief tax officer at Jackson Hewitt Tax Service, will result in refund delays.
If this type of error is made with stimulus payments or the recovery rebate credit, the taxpayer who is still entitled a refund should take no immediate action, he said.
“There will be no new tax return, no revised tax return, and no physical tax return filed. The IRS is in charge of these “As Steber stated.
Regrettably, we’re talking about a six- to 12-week wait for the IRS to correct this type of issue, Steber explained.
The IRS is not rejecting e-filed returns that contain the error; nevertheless, the agency is notifying taxpayers of the inaccuracies. The IRS advises taxpayers not to file an amended return in these circumstances.
In an ideal world, taxpayers would have received — and retained — IRS Letter 6475, which stated the amount of the taxpayer’s third stimulus payment from March through December of last year. While many people received their money in one lump sum in March, others may have received what were referred to as “plus up” instalments.
According to their 2019 tax filings, some taxpayers received a lower sum in March or April last year. They received a “plus up” payment later that year as a result of filing a 2020 income tax return. They might have qualified for further stimulus funds, for instance, if their income fell during the 2020 recession and they qualified for additional funds based on their 2020 return.
Certain “plus-up” payments were sent to individuals who first received benefits based on information obtained from the Social Security Administration, the Railroad Retirement Board, or Veterans Affairs.
The IRS Letter 6475 provides a detailed accounting of the funds received for your stimulus payment or payments last year.
Collins stated that the IRS is rechecking the figures for anomalies related to the recovery refund in order to reconcile what you are claiming for the credit with what was paid out last year.
“And if it is inconsistent, the IRS will send a letter to the taxpayer requesting that they either defend their figures or acknowledge that the IRS data may be correct,” Collins explained.
“It will be a long time before those taxpayers receive their reimbursements,” she explained.
If the numbers do not match, the tax return will be routed to the IRS’s error resolution system.
If the taxpayer still receives a refund after the IRS corrects the error, Steber explained, the IRS will revise the refund due and normally send the remainder as the new refund amount. He stated that the funds would be received either direct deposit or paper check, as directed by the taxpayer initially. Additionally, the IRS will send the taxpayer a letter outlining the change.
On the other hand, Steber explained, if the taxpayer owes money, the situation becomes more problematic. If the person owes a considerable amount of money, Steber said, it may be best to determine the amount owed, revise the return, and make a payment to the IRS before the April 18 deadline.
Are numerous refunds being processed more efficiently?
“”The good news is that the IRS is not experiencing any extraordinary or unexpected challenges,” Collins stated. As of late March, a sizable percentage of individual taxpayers are filing electronically.”
Many refunds are being issued, she added, presuming that an e-filed 1040 form is error-free.
However, all is not well. Even with e-filed returns, trouble spots might occur when errors are made.
For instance, the IRS closed the filing season last year with a backlog of roughly 10 million returns that were placed on hold as the agency reconciled inconsistencies between recovery rebate credits taxpayers believed they were owed and stimulus funds they got in 2020. Refunds on those returns were subject to delays.
Paper returns — particularly returns that require a paper check rather than direct deposit — continue to experience significantly lengthier processing times as a result of an outmoded system.
Collins, who spoke with the Free Press by phone, advised that if you file on paper, it might take six to nine months to receive a refund.
That is exactly what she stated — perhaps nine months.
Much, she said, will depend on the IRS’s ability to clear a backlog.
Given that the IRS is about a year behind schedule in processing paper returns — yes, a year behind schedule — many taxpayers will be frustrated.
As of March 18, Collins stated in a blog post, the backlog of paper returns amounted at roughly 15 million.
Collins asked the IRS in a March 30 blog post to immediately use bar coding technology for paper returns by the following filing season in order to transition away from the “IRS’s outdated data input method.”
State tax offices have been using two-dimensional bar coding to automate the processing of paper tax returns for the last two decades, she added.
“During that time period, the IRS reviewed, rejected, suggested, reconsidered, partially adopted, and deferred the issue of scanning technology,” Collins stated.
The IRS’s present endeavour to handle paper returns, she explained, invokes visions of data transcription in the 1960s.
“All paper tax returns are painstakingly transcribed by employees,” she wrote.
“Each digit and letter on the return is transcribed by key stroke. Several hundred digits may need to be transcribed for a reasonably complex return. The number of digits may approach or exceed 1,000 for longer returns with more forms and schedules.”
She added succinctly: “This does not appear absurd in the year 2022. It’s insane.”
What could cause a delay?
Certain individuals may face refund delays if they incorrectly reported their jobless benefits, which are now fully taxable on 2021 returns. Again, you do not want to make an educated guess as to how much money you received in unemployment benefits. That must be accompanied by a 1099-G.
Additionally, the IRS identified the following reasons for refund delays:
- A modification must be made to the taxpayer’s child tax credit or recovery rebate credit amount.
- A claim for an earned income tax credit or an additional child tax credit is included in the return.
The return also contains a Form 8379, Injured Spouse Allocation, which the IRS estimates will take up to 14 weeks to complete. If you’re married and filing jointly, you may find yourself utilising this form to recover your portion of a tax return if the refund was lowered to cover a debt owed by your spouse, not you.
To determine the status of a refund, taxpayers should visit IRS.gov and use the “Where’s My Refund?” feature. Within 24 hours of the IRS acknowledging receipt of a taxpayer’s e-filed return, information for the most recent tax year submitted is normally available. Taxpayers who filed a paper return should wait four weeks before verifying the status.
IRS telephone and walk-in representatives can only inquire about the status of a refund if the following conditions have been met:
- 21 days or more since it was electronically submitted (or since the start of the IRS filing season, whichever is later)
- Six weeks or more after mailing a return, or when “Where’s My Refund?” instructs the taxpayer to contact the IRS.