Millions of dollars still owed in tax refund for 2020, as the October 15 extension deadline approaches
The good news: The Internal Revenue Service says it’s on track to clear the pandemic backlog of tax year 2020 tax returns by the end of 2021, just in time for the start of the 2022 tax season.
The bad news: Millions of taxpayers are still waiting for refunds and / or are struggling to understand IRS notices that their refund amounts have been adjusted. And the IRS expects to receive an additional 4 million returns for the 2020 tax year by the Oct. 15 tax extension deadline.
“I’m pro IRS, but they’re totally overwhelmed,” says Claudia Hill, a registered agent in Cupertino, Calif. She helps clients sort IRS math error notices regarding recovery rebate credits / stimulus checks. She’s helping a taxpayer who is still awaiting a refund of over $ 1 million for the 2019 tax year. And she’s working on 62 extension returns, plus her own, expected this week.
The National Taxpayer Advocate puts it bluntly, “Taxpayers need more transparency in the processing of returns” in their September blogging series, Bumps in the Road Sequel.
Here are the latest stats from reporting season and where you can get help.
As of Oct. 2, the IRS had 6.8 million unprocessed individual tax returns for the 2020 tax year, up from 7.6 million the week before. The IRS has reduced the number of returns requiring special handling from an all-time high of 9.8 million on May 1, 2021 to the current level of 224,000 individual returns. In some cases, it can take 90 to 120 days to process. To check the status, see Where is my refund?
There are not just 1,040 tax returns in preparation. As of October 2, the IRS had 2.8 million unprocessed amended individual tax returns, Forms 1040-X. The current processing time for these is 20 weeks, compared to the usual 16 weeks. To check the status, see Where is my amended return ?.
The Where’s My Refund tool is great if you’re lucky and it shows that your refund has been approved or sent. The problem is if your return is stuck in processing. If you are one of the millions of taxpayers whose return processing has been delayed, the tool simply tells you that the return has been received by the IRS and nothing more. If you try to call the IRS and have the luck or the patience to get through it, the phone representatives usually don’t have more information.
Another option to check the status of your return is to create an IRS online account, but only 40% of people trying to do so (in August) were successful due to the multiple steps and security measures in place. If you are unable to create an account online, you can request an IRS transcript which must be mailed to you within 10 calendar days. Search for “Refund Issued” to see what payments have been made to you.
To put all of this in context, “this reporting season is anything but typical,” says the Taxpayer Advocate. It is not fair to blame the IRS and the pandemic. Blame Congress for the retroactive legislation and the new IRS warrants. By the time the US bailout was enacted in March, nearly half of all 2020 individual tax returns had been filed. This law suspended the obligation to repay excess APTC health insurance credits and created a partial exclusion of up to $ 10,200 in unemployment benefits. All those taxpayers who had declared and paid taxes suddenly had to be reimbursed. As of September 3, the IRS had processed a total of about 13 million taxpayer accounts to reflect the exclusion of unemployment income and about 1 million accounts where the APTC surplus was reported. As of mid-September, there were still about 436,000 individual returns awaiting processing in the error resolution system, the National Taxpayer Advocate reported, and these may require adjustments.
The latest confusion concerns letters sent to 6.5 million taxpayers, telling them that a notice of a 60-day appeal period was missing from the letters they received earlier about their credit calculations from recovery refund on their 2020 tax returns not matching the IRS records. “While these and other notices are often confusing, it is essential – if you receive a letter from the IRS regarding your 2020 return, do not delay in your response, as this will only further postpone potential refunds and can cause more problems down the road, ”the taxpayer lawyer said.
In Hill’s experience, for the clients she has helped with these letters so far, the IRS has been right. In one case, a client insisted she had not received a stimulus check, but when Hill finally contacted the IRS tax pro hotline, a representative was able to confirm the date and amount. of the stimulus check deposit. “They could have told us in the adjustment letter, ‘We believe you received the funds that day by direct deposit,’” says Hill.
Last week, the IRS announced a new online information portal for taxpayers who have refunds over $ 2 million that are being held for special approval. “Are you kidding me?” Hill asks. “We are asking for help for normal people who have filed tax returns whose returns have not been processed and people who have filed 2020 returns and are receiving adjustment notices.”