Frustration … Facts … Fulfillment
We all know the frustrations induced by unintended consequences … especially when it impacts our pocketbooks. Well that’s the backdrop to the current stress experienced by many taxpayers who continue to lament – “Where’s my refund?!”
In response to COVID-19 pressures, the IRS granted deferments in tax deadlines as well as changes in penalties and interest for late-filers. These concessions were intended to reduce taxpayer stress … already strained by the pandemic.
While there may be taxpayers who have benefited from the above moves, our empathy sides with our clients who communicate with us with reports that are rife with frustration, confusion and sometimes a touch of panic.
In this article, we’ll attempt to discuss the causes, status and expectations for taxpayer relief.
The 8 IRS Demons
In an attempt at fairness … not an excuse … the agency is under tremendous strain with enormous unplanned burdens triggered by three rounds of stimulus checks, plus coping with other pandemic-related changes to the tax code, such as:
1. exemption of the first $10,200 in 2020 unemployment benefits from federal tax;
2. new tax credits for employers;
3. abnormal surge of 2020 individual 1040s requiring manual processing;
4. staffing shortages;
5. challenges of remote work and retraining IRS employees;
6. leftover backlog of yet unprocessed 2019 paper tax returns;
7. established procedures now either scrapped or subject to major revisions;
8. IT overwhelmed to deliver software updates to accommodate compliance revisions.
By the IRS’s own admission … they are swamped!
With the backlog of 2019 tax filings, there was considerable pressure to extend the 2021 tax filing season as the pandemic continues to impose a “titanic strain on the agency” … as expressed by House Ways and Means Committee chairman Richard E. Neal, D-Massachusetts, and Oversight Subcommittee chairman Bill Pascrell, Jr., D-New Jersey. These pleas, along with requests filed by the AICPA and National Association of Tax Professionals were instrumental in the IRS extension of the 2021 income tax filing season to May 17.
What About Me?!
That’s what millions of American taxpayers are asking! Many if not most who have not received their refund feel like their return has fallen into a black hole exacerbated by not knowing what’s going on, when they will get their refund, why it’s being delayed, or how to get answers or help.
The Internal Revenue Service reported in mid-February that it had yet to process 6.7 million individual income tax returns for 2019. Add to that the 2 million tax returns in the IRS’s pipeline as of the last week of March 2021.
Now let’s put some context around these numbers and
the time-line of hoped-for resolutions to pan out.
Here are taxpayer profiles and their general status in the world of IRS response.
Electronically filed returns: The IRS reports 21 days as the normal turnaround time to process returns and initiate refunds … and claims that some taxpayers enjoy receiving their refunds faster. If you filed electronically, you should be among those who receive their refunds first, according to the IRS. That said, this year many returns are taking much longer.
Error Resolution System processing: An abnormally high number of 2020 individual 1040s require special manual processing through the IRS’ so-called Error Resolution System (ERS). Another surprise was prompted by Congress’ decision to allow taxpayers to use their 2019 income … rather than that calculated for 2020 … to claim the Earned Income Tax Credit or Additional Child Tax Credit for 2020.
Taxpayer “pilot error” or “response-needed” processing: Currently, the IRS has about 29 million returns to process manually. Clearly, if a taxpayer’s return is tagged to be processed manually there will be delays. What triggers a manual review? Here’s a sampling:
• 8 million awaiting ERS processing;
• 5.3 million paper 1040s from 2019 & 2020 filings;
• 4.7 million returns on hold pending taxpayer responses re errors or fraud alerts;
• 11 million business and other types of returns.
The unfortunate and unintended consequences for taxpayers have been that the IRS continues to send payment demand notices to taxpayers whose correspondence and payments remain unopened … but who have already made the payments that the IRS deems to be due.
What’s a Taxpayer to Do?
IRS Concession: The IRS initiated a short-term fix for taxpayer checks caught in the backlog of unopened mail. As detailed on the IRS web page … pending check payments and payment notices will be posted as of the date received rather than the date when they are processed by the IRS.
Note: To avoid penalties and interest, the IRS strongly advises taxpayers not to stop payment on their checks with their bank and ensure availability of funds, as the IRS will eventually get around to processing them.
Staff Shortages: The IRS admits to being short on staff, many if not most agents remain furloughed. That creates bottlenecks in opening the mail, plus dealing with the overwhelming volume of phone calls from taxpayers.
IRS Commissioner Charles Rettig told the Senate Finance Committee earlier this month that the agency had planned to hire an additional 5,000 customer phone representatives this year to help improve those numbers. That endeavor peaked at 3,800 new employees due to few applications plus fingerprinting facilities closures during the pandemic.
Lack of phone service assistance: Phone calls to the agency can leave the taxpayer on “hold” sometimes for hours. Important clarification requests go unanswered with the taxpayer left without knowing what to do next to remain in compliance.
By its own admission, the IRS confesses that:
• Account management phone lines have soared to a call rate of 300% over last tax year;
• level of service is just 14% for the 115 million calls received on its account management help lines;
• similarly, just 1 in 50 callers are getting through to a representative for 1040 related help;
Result: “Due to high call volumes, the IRS suggests waiting to contact the agency about any unprocessed paper payments still pending,” said the IRS.
Check the Status of Your Refund: According to the IRS, its Where's My Refund? tool offers a convenient way to do so. The agency claims you’ll view a personalized refund date after your return is processed and a refund is approved. Before visiting the above link, gather the following information.
• Social Security number or Individual Taxpayer Identification number;
• Tax filing status;
• Exact amount of the refund claimed on your tax return.
Your reward will be knowing when your return was received, refund approval and refund sent. Click here for a brief video description of what to do.
If any of the foregoing seems unclear as to how it applies to your specific circumstances, please keep in mind that Blair + Assoc. will help. Give us a call or drop an email.