Millions face tax refund delay as relief arrives
Because of the coronavirus pandemic, 2020 may be a tax year like no other. Here are answers to some of your top questions.
Mia Dent, like many other Americans, is eagerly awaiting her tax refund so she can catch up on bills. But it still hasn’t come.
She was also surprised to learn that her third stimulus check was sent to the wrong bank account, again.
The Columbus, Mississippi, resident, who makes $11 an hour as a personal shopper at Walmart, has fallen a few months behind on her car payments after her hours were reduced amid the coronavirus pandemic.
Last year, she updated her bank account information with the IRS for her 2019 returns, but she never received her second stimulus payment even though she got the first one.
“I was really counting on my refund and stimulus to help pay my bills,” says Dent, 27, who was expecting a $200 refund and qualifies for the $1,400 and $600 stimulus payments. “I need any money I can get.”
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Nearly 7 million tax filers who await their tax refunds face significant delays this tax season as the IRS rushes to send out stimulus checks to millions of struggling Americans who have faced economic hardship in the coronavirus pandemic. The agency is grappling with staffing and outdated IT systems at a time when it’s also implementing sweeping tax code changes from the COVID-19 relief packages.
Roughly 6.7 million returns haven’t been processed yet, according to The Washington Post, citing data from the IRS. That’s more than three times the number in the same period last year, when fewer than 2 million returns faced delayed processing, the report said.
When USA TODAY contacted the IRS, the agency directed all questions to its website, where the agency said the pandemic continues to cause delays in services such as reviewing tax returns, processing those filed on paper and answering mail from taxpayers.
The IRS is grappling with staffing problems and outdated IT systems at a time when it’s also implementing sweeping tax code changes. (Photo: Getty Images.)
Some early filers face delays
Other Americans who made sure to file electronically on Feb. 12 when tax season kicked off contacted USA TODAY this month and said they were still waiting for the IRS to process their returns. Some of them, like Dent, who filed early wanted to update their bank account information with the IRS to make sure they received the $1,400 stimulus payments.
Bonnie Wright, 32, was counting on her $8,830 refund to help shore up her family’s finances after they fell further into credit card debt. She and her husband, who are cooks, had to scrap their plans to open a restaurant last year once the pandemic hit and he was furloughed.
In late January she completed their return, and it was received by the IRS on Feb. 12, she says.
The couple started playing a game of chicken, hoping to pay their $1,260 rent with their refund this month. But it still hasn’t showed up. So they put half the rent payment on one credit card and applied for a new one to pay the rest.
Her husband has two part-time jobs to help make ends meet, one as a package sorter for UPS and another as an Amazon delivery driver. She returned to nursing school and got a part-time job as a warehouse picker at Amazon.
“I’m relying on that refund. We’ve been maxing out all of our credit cards,” says Wright, who lives with her husband and two children in Richmond, Virginia. “Knowing that we’re going to be in debt longer and longer is difficult.”
IRS grapples with new tax law changes
Some tax professionals are worried that millions of filers could face significant processing delays, especially those who already filed their taxes if they end up having to file an amended return to take advantage of new tax breaks on unemployment and dependent children from the latest relief package passed last week.
As part of the American Rescue Plan, many taxpayers wouldn’t be required to pay taxes on up to $10,200 in unemployment benefits received last year. The exclusion is up to $10,200 of jobless benefits for each spouse for married couples.
The new legislation also includes a temporary increase for the child tax credit for 2021. The credit is worth $2,000 per child under 17 that can be claimed as a dependent. The bill would temporarily boost the credit to $3,000 per child, or $3,600 per child under 6. It would allow 17-year-old children to qualify for the first time.
The IRS issues more than nine out of 10 refunds in less than 21 days, according to the agency. Sometimes a return may take longer to process if it was incomplete or incorrect, the agency says.
The IRS says refund inquiries can’t be answered by its toll-free or Taxpayer Assistance Center employees until it has been 21 days since the tax return was filed electronically.
Wright managed to get an IRS representative on the phone earlier this month after the 21 days passed, who told her to wait 10 weeks from the date her return was accepted for her refund, she says.
IRS still sorting through some of last year’s returns
But this is just the beginning when it comes to what the IRS faces this tax season. The agency is still sorting through returns from last year after the federal income tax filing due date was extended from April 15 to July 15 due to the pandemic.
“The IRS hasn’t even opened paper returns from last summer,” according to Toby Mathis, a tax expert, partner and attorney at Anderson Law Group in Las Vegas, Nevada. “The IRS sent a notice last month that they were opening mail from June.”
So Americans who filed in July could still be receiving erroneous correspondence from the IRS, Mathis said.
“This means extra work for everyone,” Mathis added. “Clients are freaked out. CPAs have to call. The IRS has to answer. It’s a total mess.”
Where does the U.S. stimulus money come from? Here’s how the Federal Reserve is saving the economy from the COVID-19 crisis.
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