Tax refunds will take longer this year — but think twice before taking an advance on yours
It will be the first week of March when the IRS starts releasing refunds on returns claiming these credits, the Earned Income Tax Credit and the Additional Child Tax Credit.
That’s a long wait — especially because the pandemic has been especially tough on the finances of lower-income households, many of the same taxpayers who are claiming these credits. People who missed out on stimulus checks last year can claim those payments in their 2020 tax returns.
A refund advance from a tax preparer or a bank may seem especially tempting this year. But consumers should keep their eyes wide open, according to consumer advocates.
“These are really expensive products,” said Michael Best, a staff attorney at the National Consumer Law Center. Best, with others at the consumer advocacy organization, recently released a report on the fees and costs that lower-income taxpayers face during tax time, including potentially high-interest refund advance loans.
Best understands why people in a squeeze might eye refund advances, but he wants them to understand the varying terms and structures of the products.
First off, the advances are structured in two different ways through a “refund anticipation check” and “refund anticipation loan.”
The former doesn’t get you money any quicker, according to the Better Business Bureau. It’s essentially putting payment on the preparation fee at the backend, taken from the refund amount. Here, the preparer creates a temporary bank account where taxpayers can access their refund once it has been processed, minus preparation fees. Although they aren’t interest-bearing loans, an administrative fee can cost up to $35 or even higher, the Center for Responsible Lending noted.
“No-fee” advances use the taxpayer’s incoming refund as collateral. Taxpayers took out 1.65 million of these advances in 2018, compared to 356,000 interest-bearing refund anticipation loans, according to IRS data cited by the National Consumer Law Center.
TurboTax has its own refund advance based on this model. It’s not a loan, so there’s no interest rate, said Lisa Greene-Lewis, a certified public accountant and tax expert for TurboTax INTU, .
The taxpayer needs to have at least a $500 refund coming, she noted. Once the IRS accepts the return — a step ahead of the processing — the advanced money goes on to a Visa V, debit card account. After the IRS processed the return, the refund, subtracting the advance and filing costs, go to the card.
For TurboTax, there are no hidden fees, Greene-Lewis said. The National Consumer Law Center report said generally, a “no fee” offer might come with larger tax preparation cost “in the form of add-on junk fees.” Even if these advances are without extra dollar costs, Best said these products could bring consumers’ attention to interest-bearing loans that tend to offer larger sums.
Finally, there are expensive interest-bearing refund anticipation loans. Interest rates on some of these loans can approach 36% and 40% APR.
A short-term loan rate shouldn’t go above 36% APR, in Best’s view. There’s been longstanding consumer advocate support for that short-term APR threshold though deregulation means actual rates can go higher, he said.
For example, the tax preparation chain Liberty Tax, through a bank, will offer pre-set loan amounts between $500 and $6,250. That comes with a 35.99% APR, which Liberty Tax discloses on the website. For example, a $1,300 loan has a $41.03 finance charge, it noted. That would mean the loan recipient would have a $1,341.03 bill due once getting their refund. Liberty Tax did not respond to a request for comment.
Another refund anticipation loan comes from Santa Barbara Tax Products Group, a company owned by Green Dot GDOT, , a fintech and bank holding company. The Fast Cash Advance loan has a 39.55% APR, according to the website. So if a recipient gets a $2,000 loan for repayment in 30 days, person getting the loan will have to pay back $2,065.67, the website explained.
Those sorts of added interest costs might sound small, Best said. But for someone for whom “every dollar counts, it could be significant.”
More refund advance loans are sticking with a set interest rate regardless of the principal amount, according to the National Consumer Law Center report.
When interest rates stay the same despite smaller principal amounts, it results in “larger loan costs for many taxpayers who select lower loan amounts and might have qualified for a lower cost product in previous years.”
A Green Dot spokesman said the company makes “every effort to responsibly and comprehensively disclose any terms to the taxpayer up front,” adding that only a small number of consumers use the Fast Cash Advance.
These advances have no recourse to the taxpayer, meaning that if for any reason their refund doesn’t go through and the advance is not repaid, repayment is not sought from other sources — “something that is uncommon in any form of lending and a great benefit to the taxpayer,” he added.
Where's my tax refund? Americans face delays as IRS holds nearly 30M tax returns for manual processing
The Internal Revenue Service is holding 29 million tax returns for manual processing, contributing to more refund delays than are typical in a normal filing season due to sweeping tax code changes, limited resources, outdated IT systems and a backlog of unprocessed 2019 paper tax returns, according to Erin Collins, the National Taxpayer Advocate.
“As one would expect, IRS employees are stretched thin working through the manual processing of these returns,” Collins said Wednesday. “So if a taxpayer’s return is pulled for manual processing, there will be delays.”
Typically, the IRS sends most refunds within 21 days or less of taxpayers filing their return. But for some early filers, the wait for a tax refund has been six weeks to eight weeks already.
Death and taxes:Americans grapple with filing the final tax return for deceased relatives in a pandemic year
Why is it taking so long to get tax refunds this year?:Some are taking the IRS 6-8 weeks in 2021
Of the nearly 30 million returns being held for manual processing, more than 8 million individual returns were in “suspense” status awaiting review and manual processing, as of the week ended April 9.
Why? The $900 billion stimulus package signed into law in December, known as the Consolidated Appropriations Act of 2021, didn’t leave the agency enough time to prepare for some of the tax code changes before the delayed filing season began Feb. 12.
IRS grapples with challenging tax season
December’s stimulus legislation had included an “income look back” rule that allowed taxpayers to use their 2019 income to calculate their eligibility for the Earned Income Tax Credit or the Additional Child Tax Credit on their 2020 tax return.
Both are refundable tax credits for low- to moderate-income working individuals and couples, particularly those with children.
Because the IRS didn’t have enough time to update its computer systems following the tax code change, a manual review of a tax return is required if a taxpayer used the 2019 “income look back” rule to calculate those credits, according to Collins.
“Due to the late passage of the law, the IRS was unable to timely adjust its forms and computer systems before the start of the filing season to allow for systemic processing of returns where taxpayers elected to use 2019 income,” Collins said. “Thus, the IRS had to create a manual process instead.”
Unemployment $10,200 tax break:Some may need to amend returns for tax refunds
Agency reviews inconsistencies with Recovery Rebate Credit
Any inconsistencies between the IRS’s records for stimulus checks, or Economic Impact Payments, along with the Recovery Rebate Credit on a taxpayer’s 2020 return would also require a manual review and corrections before processing, according to Collins.
Some taxpayers have claimed the Recovery Rebate Credit if they were eligible for any remaining stimulus money from the first two rounds of payments when they file their 2020 returns.
Any corrections to the Recovery Rebate Credit or verification of the 2019 “look back” election are being manually processed by the IRS’s Error Resolution System. The IRS is placing those returns in “suspense” until an IRS employee can review them to verify their 2019 income or their prior Economic Impact Payment. The return is essentially in a queue waiting to be reviewed and processed.
To put that into perspective, the IRS’s ERS unit doesn’t suspend returns during a normal filing season when it’s fully operational since it is able to review and process them as they come in, according to Collins.
The IRS will automatically correct miscalculations taxpayers make when claiming their first and second stimulus checks on their 2020 tax returns, the agency said in early April.
There's a backlog of unprocessed paper tax returns
An additional 3 million being reviewed are individual 2019 and 2020 paper returns. Plus, 7 million more individual returns have processing errors or fraud identification issues requiring responses from taxpayers. And another 11 million business and other returns have been held for manual processing.
The National Taxpayer Advocate has urged the IRS to provide taxpayers with more specific information so they know what to expect and, where possible, they can make adjustments to manage their finances.
“Specifically, to ease taxpayer concerns, the IRS should be more transparent and specific regarding the status of taxpayer refunds,” Collins said.
The Taxpayer Advocate Service has previously recommended that the "Where’s My Refund?" tool and IRS2Go mobile app should provide taxpayers with more specific information regarding the status of their refunds, rather than stating that refunds are “being processed.”
Taxpayers can use the "Where's My Refund?" tool to check the status of their tax refund by entering their Social Security number or ITIN, filing status and their refund amount.
View CommentsSours: https://www.usatoday.com/story/money/2021/04/23/stimulus-check-update-2021-tax-refund-delay-covid-relief-payments/7344076002/
Since the child tax credit payments started rolling out over the summer, there have been problems each month for some eligible parents. For instance, a payment might not have been issued due to inaccurate or outdated information on a 2020 tax return, or because the IRS doesn't know your family is eligible. You might be one of the families that received a paper check instead of direct deposit. With USPS mail slowdowns, it could be a while before you get your money.
If your last child tax credit payment was a no-show or was for a different amount than expected, the IRS offered a few explanations. According to the most recent statement from the tax agency, a technical issue caused 2% of recipients to miss the September check. Some households received less than expected because a correction was made to a 2020 tax return, or because only one parent -- not both -- updated the IRS with their bank account or mailing address details.
It's not easy to get in touch with the IRS for help with payment problems, but you can take a few steps now before the next monthly payments on Oct. 15, Nov. 15 and Dec. 15. Start by double-checking your information in the IRS Update Portal and making any necessary changes to your account before the next deadline, which is Nov. 1, 11:59 p.m. ET. It's too late to update your details for the October payment.
You may also need to check your eligibility to make sure you qualify. If everything adds up, we'll explain other ways to get clues about your money. Plus, here's the latest on the child tax credit possibly being extended until 2025 and unenrollment deadlines to keep in mind. This story was updated recently.
1. My child tax credit payment is late
Based on the latest IRS statement, 2% of families due to receive the credit, amounting to roughly 700,000 families, did not receive their Sept. 15 payment. The households affected should have received their payments in subsequent weeks, according to the IRS.
Here are a number of other possible reasons why your family hasn't received a July, August or September payment.
- If you're married filing jointly and only one spouse recently updated your bank account or address in the IRS Update Portal, you may have not received a September payment. This technical issue should be corrected shortly.
- Your payment was sent by mail and it's still held up by the US Postal Service. Due to a technical issue in August, millions of families received their checks by snail mail instead of direct deposit.
- You have a mixed-status household using an Individual Taxpayer Identification Number (or where one parent is an immigrant and the child has a Social Security number). Because of an IRS mishap, those families may not have received their first July payment, but should have qualified for adjusted amounts in August and September.
- Your family never filed a 2019 or 2020 tax return, so the IRS doesn't know that you qualify. If that's the case, use the nonfiler signup tool online to register for payments (the last day to sign up is Oct. 15).
- You lived in the US less than half the year in 2019 or 2020, and the IRS doesn't think you qualify, even if you now have a primary residence in the US.
- Your new baby or adopted dependent became part of your household after you filed a 2020 tax return, and you haven't been able to update those details in the IRS portal yet (the option to add dependents should be available soon).
- Your household's circumstances in 2020 disqualified you, even though your situation has now changed in 2021. This could be the case if your income was previously too high or if there was a shift in a custody arrangement.
- You already unenrolled from this year's advance monthly payments using the IRS Update Portal. If that's the case, your family will receive the credit when you file your taxes in 2022. If you decide to reenroll in the monthly payment program, you'll be able to do so later this fall.
Reasons you haven't received a child tax credit payment
|The problem||What to do|
|You didn't file a 2019 or 2020 tax return||Use the IRS nonfiler signup tool to register|
|Your payment is coming in the mail||Give it time to arrive, as it could take weeks|
|You unenrolled from advance monthly payments||Reenroll eventually through the Update Portal|
|Your bank info or mailing address is wrong||Change your details in the Update Portal now|
|Your income or number of kids has changed||Update your details when that option is made available|
|You can't find any reason why you didn't get a payment||It may be time to file a payment trace with the IRS|
2. My child tax credit payment was the wrong amount
There are several reasons why families are reporting inaccurate payment amounts. First, you'll want to quickly verify your eligibility through the Eligibility Assistant. Then we suggest using CNET's child tax credit calculator to see how much you should be receiving based on your income and the ages of your dependents.
One possible reason for a lower September payment is if only one spouse changed an address or bank account in the IRS Update Portal. In that case, the other spouse's half could have gone to the old address or bank account. Another reason why parents are getting inaccurate payment amounts is if the IRS processed your 2020 tax return late (or it wasn't filed until recently), and the agency only recently adjusted payment eligibility amounts for the third monthly check.
An additional complication is that there's currently no way to inform the IRS of household changes -- like adjusted gross income or number (or ages) of children --between the 2020 and 2021 tax seasons. The tax agency says it will eventually add more functionality to the Update Portal to allow parents to add or subtract qualifying children, or report a change in marital status or income.
Keep in mind that parents of children younger than age 6 can receive up to $300 per month or $250 for children aged 6 to 17, but those amounts phase out for higher earners. So, if your income was significantly higher last year or you didn't claim a dependent on your 2020 tax return, you might get less of the credit than you should this year based on the prior figures that the IRS has on file.
If your family didn't get a July or August payment but your first monthly advance check did come in September, your total advance credit will be divided over four months instead of six months. That will result in larger advance monthly payments: up to $450 per month for each child under age 6 and up to $375 per month for each child ages 6 through 17, according to the IRS.
Some parents may also see an incorrect (or higher) payment amount in the Update Portal due to having a closed or invalid bank account on file. According to the IRS (question G12 on that page), if the agency has to reissue a payment as a paper check after a failed attempt at direct deposit, the total amount that appears in the payments processed section of the portal may be double, even if your family received the correct amount by mail. The IRS is currently working to fix this error.
3. I don't know how to check on my payment status
The easiest way to see what's happening with your previous checks is to log in to the IRS Update Portal to view your payment history. To use it to manage all of your advance payments, you'll need to first create an ID.me account.
If the portal says your payment is coming by mail, give it several business days to arrive. If you have direct deposit set up, make sure all the information is accurate. If you haven't set up banking details in the portal, or if the bank account on file with the IRS has closed or is no longer valid, you should expect all further payments to come as paper checks.
If your payment history in the portal says that the money was sent by direct deposit, check your bank account again in the next few days to make sure it's cleared. According to the White House website, transactions will show the company name "IRS TREAS 310" with a description of "CHILDCTC" and an amount for up to $300 per kid (unless there's been an adjustment due to a missing payment). Don't get this deposit confused with those for stimulus checks, which show up as "TAXEIP3" when deposited. Also, if you're waiting on a tax refund, it'll show up as "TAX REF."
If you've verified your eligibility, and your account says that your payments were issued but they're still missing, you may need to file a payment trace with the IRS. To do that, you'll need to complete Form 3911 (PDF) and mail or fax it to the IRS. Only do this if it's been at least five days since the scheduled deposit date, or four weeks since the payment was mailed by check. We explain how to file a payment trace here.
Now playing:Watch this: Child tax credit: Everything we know
4. I'm not eligible for the child tax credit, but still got a check
With the IRS sending out millions of child tax credit payments, along with keeping up with income tax refunds and unemployment tax refunds, it's certainly possible the agency could have made a mistake and sent you a check even if you don't qualify. For instance, some people who weren't qualified for stimulus checks still received payments. It could also be that your family qualified in prior years but will not qualify when they file their 2021 tax return in 2022.
If you're absolutely positive you're not eligible for this year's enhanced child tax credit payments but you got a payment, you'll need to return that money to the IRS. Start by using the Update Portal to unenroll from future payments -- the next deadline is Nov. 1, 11:59 p.m. ET. This will help you avoid having to pay back more money when you file taxes in 2022.
Keep in mind that both parents need to unenroll separately. If your spouse unenrolls and you don't, you'll get half of the joint payment you were supposed to receive with your spouse.
5. I got sent too much and I don't want to owe the IRS money
If you're eligible for the full amount of child tax credit money, you won't have to pay it back. Child tax credit payments do not count as income. However, if you no longer qualify for the full amount but you receive the full amount anyway, you may need to pay back that extra money.
An overpayment from the IRS may occur if your income went up this year (meaning you're getting too much money based on old tax info) or if your child is aging out of a payment bracket this year (meaning the IRS is determining amounts for a 5-year-old instead of your 6-year-old). The age brackets for dependents apply to how old your child will be at the end of this calendar year. The IRS says you should be able to sign in to the Update Portal to make these kinds of adjustments to your child tax credit account sometime this month.
The agency is using what it calls "repayment protection," so if you do receive an overpayment but fall below a set income level, you don't have to pay the money back. Above that income level, you will have to pay back some or all of the extra funds. Here's more on taxes and how repayment protection works.
What about extending the child tax credit to 2025?
As of right now, the increased payments are still temporary, just for the 2021 tax year. That means after you get your final payment with your tax refund in 2022, the child tax credit could revert back to its original amount from previous years.
On Sept. 15, some 450 economists signed an open letter to congressional leaders calling to extend the child tax credit, noting that it could "dramatically improve the lives of millions of children" and help reduce poverty.
Now Washington is debating on extending this year's changes, but some lawmakers are pressing for a work requirement. The current changes to the 2021 child tax credit made the credit $3,600 for children under age 6 and let families qualify if they have little or no income.
We'll continue to update this story as we find out more.
Here's how to opt out of advance payments and how to track down your child tax credit payment if you didn't receive it. Not sure you got the right amount? Use CNET's child tax credit calculator to see how much you should get.
Non-Filers: Enter Payment Info Here Tool Is Closed
The tool is closed and it will not be available for other payments including the second Economic Impact Payment or the Recovery Rebate Credit. Economic Impact Payments were an advance payment of the Recovery Rebate Credit. You may be eligible to claim the credit by filing a 2020 1040 or 1040-SR for free using the IRS Free File program. These free tax software programs can be used by people who are not normally required to file tax returns but are eligible to claim the credit.
If you submitted your information using this tool by November 21, 2020 or by mail for the first Economic Impact Payment, IRS will use that information to send you the second Economic Impact Payment, if you’re eligible.
You can check your payment status with Get My Payment. Go to IRS.gov Coronavirus Tax Relief and Economic Impact Payments for more information.
Did you miss the deadline to register for the Economic Impact Payments?
If so, you may be eligible for both Economic Impact Payments by filing a 1040 or 1040-SR in 2021 to claim the Recovery Rebate Credit.
For more information about Economic Impact Payments or how to file go to:
Eitc reddit 2020 refund
When it comes to tax season I receive a lot of reader questions, many tinged with a hint of desperation, around why IRS tax refunds are taking so long to be processed and what can be done to get refunds sooner rather than later. This was no different in the latest tax season where a number of folks have commented on the extended delays they are seeing with the processing of their tax returns and payment of long overdue refunds.
In fact for the latest tax season, the IRS has already announced that there will likely be longer than usual tax refund payment delays due to the payment and processing of new stimulus payments and tax credits over the new year and existing tax code changes to combat the COVID pandemic fallout. Further those who filed for extensions will likely face even longer delays in getting any refunds due.
For returns that require special handling or manual processing the IRS has said that due to staffing shortages it is taking up to 120 days to complete processing and notify taxpayers of adjustments or adjudications.
Other reasons your refund may be delayed per the IRS
- Additional or random security checks – especially if fraudulent activities were associated with your filing in the past
- Amended returns require additional, and manual processing, which can see refunds delayed for up to 16 weeks
- Missing or incomplete documentation or information in your return (most online tax filing software checks for this, but manually filed returns are more at risk)
- Incorrect bank details or account numbers provided in your return (see below for how to address)
- If you are using a pre-paid card for the first time and were using a middleman bank (SBBT, Republic, Bofi, etc), some people have had their refund not deposited because the middleman bank does not test deposits to ensure the account is active and correct
- You filed an injured spouse claim
- Refund claims with an application for an individual taxpayer identification number (ITIN) attached (see Topic 857 for more information on this)
- Refund offset which reduces your payment due to other federal or state obligations. See section below on this for more
- If you requested a refund of tax withheld on a Form 1042-S (PDF) by filing a Form 1040NR (PDF), allow up to 6 months from the original due date of the 1040NR return or the date you actually filed the 1040NR, whichever is later, to receive any refund due (see more details in tax topic 152)
- You claimed the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). Congrss perform further identity verification checks and update systems that allows claimants to use 2019 tax year information to qualify for these credits due to a job or income loss in 2020.
As always keeping checking the IRS’ Where is My Refund Apps (WMR and IRS2GO) for exact dates on your refund payment. You can start checking on the status of your refund within 24 hours after the IRS receives your e-filed return or 4 weeks after you mail a paper return. The WMR apps displays your tax return processing through three stages: Return Received; Refund Approved; Refund Sent. You can see more on refunds in these 2 videos covering this topic
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So what can you do if your tax refund is taking much longer to get than expected?
There are two main categories that cause your tax refund processing to taking longer than expected. Either something is wrong with your tax return filing, e.g. missing information, additional Identity fraud/verification (details below), incorrect social security numbers etc; or information from related sources (employer, ex-partner) do not add up. For example same dependent claimed in multiple tax returns. So here are a few things you can do to try and figure out why your tax refund is so taking so long to get to you.
- Check the IRS tax tool, where’s my refund (WMR) or IRS2Go mobile app, to get the official status of your refund (see estimated IRS refund schedule). It is updated daily (overnight) and provides the latest processing status of your tax refund. The IRS has announced that it expects to issue more than 90% of refunds to taxpayers in less than 21 days (not business days). So even if you have submitted all your documents you probably need to wait for at least 21 days before taking on more drastic actions. And if you paper filed, you may need to wait more than 6 weeks before hearing back from the IRS.
- Why is my e-filed tax return in “Pending” status and the IRS has no record of my tax return? TurboTax experts say that after e-filing, your federal return may sit in “Pending” status 24-48 hours before its processing status changes. If you contact the IRS or try to look up your return or refund status on their site while your return is in “Pending” status, don’t be alarmed if they tell you they have no record of your return. This is normal; once the IRS acknowledges your return, they will update your status to via WMR to Return Received, Refund Approved and Refund Sent. See this article for more details on what the WMR refund status’ mean.
- What do these IRS refund status’ mean? Return Received means the IRS has your tax return and is processing/reviewing it. Your estimated refund date will be available as soon as the IRS finishes processing your return and confirm that your refund has been approved. Generally it takes just a few days for the status to shift from Return Received to Refund Approved if all is in order. But any issues with processing your return will delay things and a refund date will not be provided until your refund has been approved.In some cases the refund tracker graphic (shown here) will not be shown if your return is being reviewed prior to step two: “Refund Approved,” and instead an explanation or instructions will be provided by the IRS depending on the situation. This can happen even if you previously checked Where’s My Refund? and it showed the status as “Return Received” along with the tracker. If the IRS needs more information specific to your return, they will contact you by mail (be aware of IRS imitation scams). You should follow the instructions in the IRS letter as soon as possible to prevent further delays with receiving your return.
- Review your tax return and make sure there no obvious mistakes like missing names/SSN or forgetting to sign your tax return. According to the IRS, one of the main things causing people to experience delays in getting their refunds is returns that are not accurately completed. So to ensure you get your refund ensure your return is as accurate as possible. You can resubmit an amended tax return entering the changes and explaining why you need to amend your original tax return. You don’t have to redo your entire return, either. Just show the necessary changes and adjust your tax liability accordingly. You usually do not need to file an amended return because you forgot to include tax forms such as W-2s or 1099 forms. The IRS normally will send a separate request asking for those documents.
- Get online help from various articles on people seeing delays with their refunds. On one of my articles covering the IRS refund schedule I got 6000+ comments, with the following useful real life tips you won’t find elsewhere:
- If you claim certain credits like the Earned Income Credit or Education credits in your tax return, the IRS announced that refunds these returns generate may take longer (under PATH act). So expect your refund to take longer in this case – possibly into April, even if you filed early.
- Hire an accountant or tax services firm to follow up this issue on your behalf particularly if you have a tax obligation to the IRS. But be warned, these are not the cheapest options and if you refund is less than $1,000 it may not be worth the cost.
- Calling the IRS is an option, though getting through to someone is a challenge. You can go the IRS resources page to get the latest contact IRS numbers/locations. Here is a way to get a real IRS person:
- Dial 800-829-1040 – if they say they have high volume calls hang up, you’re wasting your time, call again until it doesn’t say high volume.
- Then dial 1- for English or 2 for Spanish.
- Then listen to the options and dial 2 then 1 then 4, then 2 again, until it finally asks for your social… they will try to trick you after that, but don’t dial anything it will take you to an operator. it’s a process but you’ll get to someone as long as you DO NOT say you have questions about your refund, cause then it will tell you to go online. make sure your cell is charge when you call cause you can wait up till an hour. Good luck people, and hope we all get our refund. Heck, we worked for it!!! =)
- Check with the middleman bank (SBBT, Republic, Bofi, etc) that they received your refund and sent it to your personal account. If filed jointly make sure both names are on your bank account/pre-paid card as this can sometimes cause your refund to be held or rejected.
IRS Operations Page
To get the latest update on IRS tax refund processing delays, you can see the IRS operations page which provides information on key functions and causes behind some of the delays when it comes to phone support, paper filed returns and ongoing reviews.
Tax Payer Identify Verification Delaying IRS Tax Refund Processing and Direct Deposit Payments
In a lot of recent cases, it appears that the IRS is delaying refund processing because they are having to spend a lot more time validating tax payer identities given the rise in online tax related fraud over the last few years. In most cases the IRS will notify selected tax filers via WMR or mail (they will never call you) to contact a IRS number to verify their identity. After verification it could take up to 9 weeks for you to get a refund. See more in this article.
Refund Offset – Why Your Refund May be less than expected
Another area of confusion for those expecting a refund is that when they get a refund it is actually less than the amount they were expecting or provided by their e-filing tool. The reason for this is that the federal government has “offset” or deducted monies from your tax refund to cover debts you owe other federal agencies. Under the law, federal payments such as tax refunds can be collected against by approved agencies (e.g the IRS) before being paid to you. You will get a letter from the IRS explaining this offset to your federal refund and why it differs from what was estimated in your filed return. They will give you an opportunity to dispute this collection, but you will have to prove you had no federal obligations. If you have questions regarding the offset of your refund you can call the Treasury Offset Program (TOP) on 800-304-3107.
When will I get my paper check if my Direct Deposit is delayed or rejected?
At times people will change their bank accounts after their return is filed or provide incorrect account numbers. In these instances the IRS will issue a paper check when they cannot send by direct deposit. This will delay your refund, but the actually IRS processing time for a paper check is only 2 extra days more than direct deposit. Usually paper checks are mailed on Friday’s and you usually get within 1 week; the following Friday or sooner. The US Postal usually don’t deliver refund checks until Saturday morning to prevent someone watching your mail and stealing the check.
If I can order my IRS tax transcript does it mean I am getting my refund direct deposited soon?
This question comes up a lot and I have seen a few comments on this as shown below.
Tracie – If you can get your tax return transcript then you will have your DD within two days I hope this helps someone GOD BLESS AND I HOPE WE ALL GET OURS IN A TIMELY MANNER SINCE THE FIX IN THE SYSTEM
Ashley – Filed and accepted on the 19th. Still can’t order transcripts online or over the phone. No info available in WMR. Says still processing. I seen on another forum that the IRS does bulk approvals on Sundays and Wednesdays, so I’m PRAYING I am part of that chaos so I can get my money this week! Never had to wait this long.
jessew – I have talked to the IRS and they finally moved my bar from 1 bar to 2 approved this morning. Go to the home page and request for a transcript if it goes through they have processed ur taxes that is what the irs lady tolled me. good luck everyone
Estella – I ordered my transcripts yesterday and was able to. If you are able to do so then you’re taxes have approved. Transcript have to be accurate because they are used for loan purposes. I filed on the 23 and was accepted same day. This morning I was approved with a DDD of 02/10.
Yes there is a correlation because to get a transcript the IRS generally has to have processed your tax return (and refund where applicable) and are an official IRS document. But the IRS is very clear that being able to request a transcript does not mean you will imminently be getting a refund and is among the common myths and misconceptions repeated in social media. They still say that checking the WMR tool is the best and official way to check your refund status.
However I have been seeing a lot of comments from people saying that when the WMR site provides limited information on the refund, requesting a free IRS transcript seems to be another way of checking the status of the refund. Generally if you can request a transcript, it means the refund is on the way and the IRS has completed processing of your tax return. But this is all anecdotal evidence.
Tax Topic 151 vs 152 notice
When you log on to the WMR website or IRS2Go mobile app, you may be presented with a message to refer to IRS Tax topic 151 or 152 in relation to your refund. But what do these mean? Tax Topic 151 simply means that you’re getting a tax offset (see above) which may result in your refund being less than you expected. You will get an official IRS letter/report explaining the actual offset and adjustments to your tax return, and details on how to appeal this action – but likely it will delay you getting your refund. While not great news, the silver lining here is that the IRS has processed your return and your adjusted refund (where applicable) should be on its way.
Tax Topic 152 on the other hand means means you’re getting a tax refund in line with IRS processing guidelines (generally within 21 days) and this notice confirm the methods for payment (direct deposit, check).
I know it can be really frustrating to see ongoing delays in getting your tax refund. My answer is be patient, look into the above steps and contact a tax advocate or tax professional if you get nowhere with the IRS.
WMR and IRS2GO Refund Status Error Codes
When you see an error on the WMR and IRS2Go tool you will get an error code and a short description. Sometimes these can tell you the cause (e.g 1161 – Refund delayed, bankruptcy on account ). But in many cases this provides no help and in that case you should reference the IRS Refund Error Code list to get more details. You can also see the comments below for more errors people are facing.
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Tax Refunds: IRS Delays Hold Up Money For Millions Of Taxpayers
(CBS New York) — The Internal Revenue Service (IRS) has had a busy year. A June 30 report from National Taxpayer Advocate Erin Collins says the agency has completed 136 million tax returns, distributed two more rounds of stimulus checks, revised rules for unemployment insurance, and prepared for the launch of advance Child Tax Credit payments (which have since started). The IRS accomplished all of this during what is hopefully the last part of a pandemic, which followed a decade of staffing and funding cuts. But their efforts to weather what Collins described as a “perfect storm” fell a little short. The report pointed out that over 35 million tax returns (roughly two-thirds of which are refunds) remained unprocessed or in some stage of processing. The agency has certainly decreased that number in the last month. But millions of tax refunds are still pending.
“The IRS and its employees deserve tremendous credit for what they have accomplished under very difficult circumstances, but there is always room for improvement.” Collins wrote in her report.READ MORE: Will There Be A National Vaccine Mandate?
“This year, the IRS is dealing with an unprecedented number of returns requiring manual review, slowing the issuance of refunds,” Collins continued. “These processing backlogs matter greatly because most taxpayers overpay their tax during the year by way of wage withholding or estimated tax payments and are entitled to receive refunds when they file their returns. Moreover, the government uses the tax system to distribute other financial benefits.”
The 35 million pending returns at the time of the report account for 20 percent of the total returns submitted. And with the May 17 federal tax deadline well in the past are the time of the report, the IRS was well beyond its goal of processing returns in 21 days. A variety of reasons account for the ongoing delay.
Starting From Behind
Many of the factors that contribute to the backlog are largely beyond the IRS’s control. The agency came into the most recent tax season with millions of pending tax returns from 2019 and before. As with most office workers, many IRS employees had to do their jobs from home for much of the pandemic. Paper returns, which sat in trailers awaiting processing, were inaccessible. Only when workers returned to the office could they tackle these.
Pandemic-related changes to the tax code were also passed just weeks before tax season. The Consolidated Appropriations Act, 2021, which included the $900 billion second stimulus package, contains a “lookback rule.” That lets filers who qualify for the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) use their 2019 income to figure out the right amount on their 2020 return. The IRS didn’t have enough time to change forms and adjust computer systems. As a result, millions of forms have to be processed manually through their Error Resolution System.
Discrepancies with the Rebate Recovery Credit were also set aside for manual processing. This is the credit people can claim if they received less than they were eligible for in their first or second stimulus check. At one point, the Treasury Inspector General for Tax Administration reported that about one-third of those who had claimed the Rebate Recovery Credit had their forms flagged for review.
More Reasons For The Backlog
Since the start of 2021, the IRS has issued the second and third economic impact payments, better known as stimulus checks. The second, for up to $600, started going out at the end of December 2020, as part of the Coronavirus Response and Relief Supplemental Appropriations Act. The third, for up to $1,400, started going out in the middle of March, as part of the American Rescue Plan Act. The IRS began accepting tax returns on February 12. So the latest check was processed during tax season, its busiest time of the year.
Another key component of the American Rescue Plan is the updated Child Tax Credit. Starting July 15, the IRS is paying $3,600 per child to parents of children up to age five. Half is coming as six monthly payments, and half as a 2021 tax credit. That comes out to $300 per month and another $1,800 at tax time. The total amount changes to $3,000 per child for parents of six to 17 year olds, or $250 per month and $1,500 at tax time. The IRS also stood up this new program of monthly Child Tax Credit payments during tax season. While the agency has now sent out three stimulus checks, it has no experience sending out millions of periodic payments. Resources dedicated to setting up this program are resources not dedicated to its core mission, which is to “provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.”
Poor ServiceREAD MORE: Fourth Stimulus Check: Is Another Relief Payment Coming Your Way?
Americans have not received that “top quality service” this year. The lesser level of service started online and extended to in-person interactions over the telephone.
With delays across the country, people looked to the IRS’s Where’s My Refund tool to find information on their pending refunds. (For the 2021 filing season, the IRS processed 96 million refunds worth a total of $270 billion.) The tool can tell a taxpayer that their filing was received, approved, or sent. It does not provide any specifics about what’s holding up the refund, what additional information might be needed for processing, or when it might be issued. That lack of transparency inevitably pushes people to call on the telephone.
Taxpayers seeking information and guidance turned to the agency’s toll-free phone lines. And the number of people inquiring was staggering. The IRS received 167 million calls during the 2021 tax season, almost quadruple the number it received during the 2018 tax season. At peak times,1,500 calls came in per second. Unsurprisingly, the level of service dropped dramatically. Only nine percent of callers seeking tax help reached someone who could provide it. Calls to the 1040 support line specifically reached a live person only three percent of the time
Overworked And Underfunded
Collins’s report also cites limited resources and technology issues as reasons for delays in processing tax returns. The agency operated under many of the same limitations that have affected office workers the world over during the pandemic. That included remote work, which can lower efficiency. The IRS is also understaffed and underfunded. Congress has continually reduced the agency’s budget over the last decade, with funding and total employment both down by about 20 percent.
An IRS watchdog informed Congress that budget cuts limit the agency’s ability to keep up with technology and collect taxes. The agency has long relied on an old programming language called COBOL. That isn’t necessarily a problem, unless the code isn’t kept up to date. And the IRS hasn’t kept it up to date. So when stimulus checks or changes to the tax code come along, the agency has to find and pay programmers to fix things. The IRS initiated a modernization effort in 2019, but it relied on future funding. That funding hasn’t materialized yet. As a possible example of the effects, “42 percent of the printers and copiers of IRS Submission Processing functions were unusable or broken,” as per the report. President Biden is also looking to increase the agency’s funding by $80 billion over the next decade. The budget would grow at a rate of 10 percent per year, and the workforce at a rate of 15 percent per year.
Beginning the tax season at a disadvantage contributed to the 35 million-return backlog. Tasking the IRS with stimulus checks and the updated Child Tax Credit at the same time drew resources away from processing tax returns. And a history of understaffing and underfunding set them up for failure. All of this put a strain on Americans who were counting on timely refunds. That strain continues.
“The IRS’s historically high number of returns requiring manual review means that most individual taxpayers in this group and many business taxpayers will not receive timely refunds and will have to wait until the IRS eventually processes their returns,” wrote Collins. “For taxpayers who can afford to wait, the best advice is to be patient and give the IRS time to work through its processing backlog. But particularly for low-income taxpayers and small businesses operating on the margin, refund delays can impose significant financial hardships.”MORE NEWS: Child Tax Credit: Why Are Some Parents Having Problems?
First published Friday, July 2, 2021 at 3:39 p.m. ET.
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