In the U.S., three out of four taxpayers receive an IRS refund every year, which is usually the biggest check of the year for a family. Tax season is now underway, and taxpayers may see another snarl in the IRS’s return processing like last year when more than 30 million returns were delayed.
In December, Treasury officials warned that this year’s tax season would be challenging after the IRS began processing returns on January 24. The IRS has a significant backlog of returns from 2021 to blame for this. The IRS had yet to process 6 million tax returns as of December 31.
The IRS estimates that most Americans will receive their refunds within 21 days of submitting their tax returns in 2022, despite the taxpayers’ growing anxiety. Meanwhile, according to posts on social media, some taxpayers have already received their refunds.
As of February 11, 4.3 million refunds totaling $9.5 billion have been issued. But IRS Commissioner Charles Rettig noted in a Yahoo Finance article that “millions are waiting for their returns to be processed.” He also noted that the agency has the same level of staffing as in the 1970s despite the U.S. population has grown by 60% since then.
Yessssss. My tax refund hit my bank account!!!! Bless the financial gods!
— KB (@KBOnTheRadio) February 4, 2022
The 21-day window for a refund does have some caveats, however. Because of regulations designed to deter fraud, claiming the Earned Income Tax Credit or the Child Tax Credit will delay your tax return. The IRS disclosed that those claiming the credits and filing their returns just before or close to January 24 may not receive a refund until early March.
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Your refund can be slowed down by a number of issues, such as math errors or inadvertently reporting the amount you received from the advanced Child Tax Credit payments. As a result, IRS could flag your return, resulting in weeks or even months of delays.
According to the IRS, it may take 90 to 120 days to resolve tax returns error involving the third stimulus check, missing information, or involving suspected fraud or theft.
There is also the possibility that some taxpayers will inadvertently claim the incorrect amount on their tax returns. According to the IRS on Monday, some of its Child Tax Credit letters contained inaccurate information about the amount some taxpayers received. When filing a tax return, taxpayers should refer to the letter sent by the IRS for correct filing.
According to Larry Gray, a CPA and government relations liaison for the National Association of Tax Professionals, if this happens, the return may not match what the IRS has on file.
“People may not realize the letter could be wrong, and what is the IRS doing to send out a follow-up communication to stop creating a bigger backlog in the coming season?” Greene said during a conference call to discuss tax professionals’ concerns about this year’s tax season.
CPA Advisor reported said that taxpayers who e-file can receive their refunds in as little as a week if all goes well, based on past processing times. As tax season begins and more returns are handled by the IRS, it is important to keep in mind that processing times may slow down.
Ongoing Backlog
Experts say taxpayers can take some steps in the meantime to boost the chances of getting a quick tax refund, which is especially important this year since the IRS has started to accumulate a backlog. Erin M. Collins, the National Taxpayer Advocate, issued a report to Congress warning that she is “deeply concerned about the upcoming filing season” due to the backlog, among other things.
“The first thing you know if you are going to cook a meal, you have to have the kitchen cleaned up from the last meal,” said Mark W. Everson, vice chairman at Alliantgroup and former Commissioner of the IRS. “It just snowballs into a terrible situation.”
Among the agency’s most pressing problems is the delay in processing tax returns, Collins said in her report, which described an agency in crisis.
‘Weeks and Weeks’ Delay from IRS
While the IRS claims most refunds will be issued within 21 days, experts warn that there is a possibility of delays going beyond that since it is still preparing 2020 tax returns.
IRS data showed that in the 2020 budget year, more than 240 million tax returns were processed, and approximately $736 billion in refunds, including $268 billion in federal stimulus payments, were issued. About 60 million people visited or called an IRS office during that time period.
Professor Donald Williamson of American University in Washington predicts “weeks and weeks” of IRS delays in 2022.
“My advice in 2022 is file early, get started tomorrow and try to put your taxes together with a qualified professional,” He said.
CBS MoneyWatch reported that tax preparers still have difficulty getting in touch with IRS personnel. Collins reported that the IRS answered only one out of every nine taxpayer calls during the fiscal year 2021.
“Many taxpayers are not getting answers to their questions and are frustrated,” she noted.
“Back in the old days, you’d wait 5-10 minutes and get an IRS agent on the phone,” said Christian Cyr, chief investment officer, and CPA at Cyr Financial.
However, now his CPAs must wait hours before speaking with an IRS employee, and there is no guarantee they will reach one.
An average refund last year was about $2,800, so ensuring smooth tax filing comes with a lot of risks. According to CBS News, you can get a tax refund within 21 days if you follow the below tips from tax experts and the IRS.
1. Use an Electronic Filing
According to the IRS, this is an important step this year. The IRS said filing electronically increases the chances of taxpayers having their refunds processed more quickly, regardless of whether people prefer to file paper returns.
IRS computers process electronic returns, whereas human employees must process paper returns. As early as the pandemic broke out, the IRS closed its offices and employees stopped opening mail, which delayed the processing of paper returns.
Apart from the pandemic strains, the IRS has struggled to hire enough staff to keep up with population growth. Despite a population increase of 60%, the agency’s workforce has not changed since 1970. The result is fewer workers handling a greater volume of work (returns).
The Taxpayer Advocate Service reports that about 10 million people filed paper returns last year, which is about 7% of the 148 million returns filed in 2021. Experts recommend that people join the roughly 138 million taxpayers who already use e-filing.
“Paper is the IRS’s Kryptonite, and the agency is still buried in it,” said National Taxpayer Advocate Collins.
2. Receive a Refund by direct deposit
Additionally, the IRS recommends that taxpayers arrange for direct deposit of their refunds. Direct deposit, which sends the money directly to your bank account, is the fastest way to receive your money, according to the agency.
95 million people received refunds last year, and 87 million chose direct deposit to receive their money. According to the IRS, taxpayers who choose direct deposit and file electronically receive their refunds within 21 days of filing (so far there is no error).
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3. Don’t Guesstimate
Taxpayers detail their return data in their tax returns, and the IRS verifies that it corresponds with what they report. Returns with discrepancies will be flagged to an employee for manual review.
Your tax return will likely be delayed by weeks or even months once that happens. Because of this, tax experts recommend people double-check their forms to make sure they are reporting data accurately. Getting your tax return completed shouldn’t be based on “word of mouth or the honor system,” Cyr said. “I guarantee that will cause delays.”
4. Save IRS Letters about Stimulus, CTC
Similarly, the IRS is mailing letters this month to taxpayers who received federal stimulus checks in 2021 and those who received child tax credits early.
Taxpayers will receive these letters informing them of what they received through these programs in 2021.
The primary reason for 2021’s tax returns being delayed was taxpayers’ errors reporting their stimulus payments for 2020. This resulted in their filings being flagged for manual review.
“Don’t have any problems that are caused by your own negligence,” Everson suggested.
The IRS advises taxpayers, however, to double-check the amount they received when logging into their accounts at IRS.gov due to incorrect correspondence.
There will be two letters to you from the IRS:
- Letter 6419 — notifying taxpayers of their CTC payments in advance. Throughout January, the agency will continue to send these letters.
- Letter 6475 — pertaining to the third stimulus check. You will receive the letter by the end of January.
Tax experts say that you should keep both of these letters and refer to them when completing your tax return.
If You Claim These Tax Credits, You May Face Delay
Even if you follow all the steps correctly, there are some issues that may cause delays.
According to the IRS, refunds involving the Earned Income Tax Credit (EITC) or Child Tax Credit cannot be issued before mid-February.
“The law provides this additional time to help the IRS stop fraudulent refunds from being issued,” the IRS said this week.
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If either of these tax credits appears on your return, you might not receive a refund by the 21-day deadline even if you file as soon as possible on January 24. If you filed your return close to January 24 or on that date, then you will probably be receiving your refund in early March, according to the IRS.
This is due to a 2015 law that slows down refunds for people claiming credits. Fraudsters whose method of stealing taxpayers’ refunds is through identity theft were targeted with this measure.
