"You should get your refund in about 2 weeks."
"The IRS is a little slower than usual, give it another week."
"... Well, this is awkward..."
Many taxpayers are stuck in an unpleasant situation of not getting their refund as timely as expected. If you filed your tax return in February, you likely got your refund without too much waiting. However, taxpayers that filed in March and April had a much higher chance of having their refund be delayed. Why?
I don't need to understand, just tell me what to do!
Contact the Taxpayer Advocate Service if you believe your refund is "causing you financial hardship, you’ve tried repeatedly and aren’t receiving a response from the IRS, or you feel your taxpayer rights aren’t being respected". Visit the link above, or call 877-777-4778
First, there is no need to worry. This is not an indication that anything is wrong. The IRS just wants to verify that everything is correct.
The IRS is manually reviewing many more returns this year than in previous years, and that is what the hold-up is: You are waiting for an actual IRS employee to physically look at your return. There is nothing that can be done to have your return done faster, and there is no timetable as to when you can expect your return to be processed, as it will depend on actual people working at IRS to process your return (among many, many others) manually.
But why is just reviewing your return taking so long? Consider everything that has happened with the IRS since April of 2020:
Backlog: IRS shut down for a portion of 2020, and returned with limited staff. They are still catching up on the 2019 returns, adding additional workload to the current tax season, with fewer staff to do the work.
Stimulus payments: The IRS is still distributing the 3rd stimulus payments to many taxpayers, and they are working hard to make sure that they are accurate. The IRS has to modify and create processes to account for this. The IRS also needs to manually review any stimulus reported on your tax return that does not match their records. This requires an employee to actually look at the return, which takes time - considering how the IRS is still not working at full capacity.
Unemployment Tax: Legislation in March (midway through tax season!) allowed up to $10,200 of unemployment benefits to be non-taxable. The IRS has to modify and create processes to account for this.
Earned Income Credit: Taxpayers were given the option to use their 2019 income in order to claim the Earned Income Credit and the Additional Child Tax Credit. If your 2019 income was used for this purpose and the IRS has not yet processed your 2019 return, an employee will have to verify the numbers personally before your return finishes processing. This requires an employee to actually look at the return, which takes time - considering how the IRS is still not working at full capacity.
Healthcare Exclusions: As part of the American Rescue Plan Act, if you paid or owed a premium on your Healthcare Marketplace, it was removed or refunded to you as part of your 2020 tax return. The IRS has to modify and create processes to account for this.
COVID Staffing: In response to the pandemic, IRS limited their staffing in order to accommodate health & safety precautions related to the spread of the COVID-19 virus. The IRS was not opening mail for several months of 2020, and is still (as of April 2021) trying to catch up on their 2020 mail.
Fraud Prevention & Accuracy: Due to the adjustments to tax rules, the IRS is "spot checking" more returns this year than usual. Unfortunately, since the IRS is working at a limited capacity due to the pandemic, that means that the IRS employees have more work than usual, but for fewer staff to handle the additional workload.
Typically, the majority of taxpayers' returns are reviewed digitally, a quick and simple way of preventing fraud and assuring general accuracy of the tax returns filed. "Spot checking" refers to a practice of an employee personally reviewing a return. Returns that include Earned Income Credit and the Additional Child Tax Credit are routinely "spot checked" at a higher rate than returns without those credits due to the higher potential for fraud. Spot checks on returns without those credits do happen, although it is usually at a lower rate. This year, many returns have "extras" that the IRS wants to keep on top of in order to prevent fraud.
What is a "Spot Check"? I have a stack of 10 returns. I will pull 3 random files for review to make sure everything is correct, since it would be inefficient to check every file for accuracy.
I would recommend checking "Where's My Refund?" once a week to keep tabs on the situation. The IRS also has an app that might be easier to use than the website. The app and the "Where's My Refund?" browser link are both available on this webpage: https://www.irs.gov/refunds
You can also contact the Taxpayer Advocate Service (TAS), a free service that might be able to help you contact the IRS. This is your best option at resolving your refund issues. We would ordinarily love to help our clients, but unfortunately we do not have any special secret phone number to avoid the hours-long hold times when calling the IRS, and we have no special powers to make the IRS move faster. The Taxpayer Advocate Service might be able to help you get the wheels turning.
"Your refund has been reduced"
If the status screen shows that you will be receiving a reduced refund, the IRS will send you a letter detailing why they reduced your refund. The most common reason for your refund to be reduced for your 2020 tax return is misreported stimulus amounts. If you reported that you did not receive a stimulus, or if you reported a lesser amount than what you actually received, you would have been expecting to get the missing amount as a refund on your 2020 tax return. However, if you actually did receive the correct amount, the IRS will reduce your refund by that amount.
For example: You and your spouse report on your 2020 tax return that you only received $1200 from the first stimulus, when you should have received a household total of $2400. You don't have a way to immediately verify the amount, but you're pretty sure you only got $1200 and you are comfortable reporting that, so we file your taxes with that amount, giving you a refund of $1200 (the missing stimulus amount). The IRS processes your return and it flags, since the IRS systems show that they did send you the full $2400 - either that, or they decided you received the total amount that you qualified for. The IRS will reduce your refund by $1200, since they show that they already gave it to you (or that you didn't qualify).
If you disagree with the letter, the IRS has a FAQ page that can provide guidance, and the IRS letter should also provide you with the next steps that should be taken.
If you ever receive an IRS or Oklahoma Taxpayer Commission letter that you don't understand, bring us the letter so that we can help figure out what happened - we won't be able to help you until we get a chance to look at the letter. Alternatively, you can send us the letter by taking a picture/scanning the letter and emailing it to us, or by uploading to the secure online portal for a safer delivery of sensitive documents. If you have not used our secure portal before and would like to use this option, please call our office to get set up.
For more information, visit the National Taxpayer Advocate blog or the IRS Coronavirus page.
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