As the Internal Revenue Service (IRS) begins to recall its employees throughout the month of June, its workers are returning to their offices with a daunting task ahead of them. According to Sunita Lough, the IRS Deputy Commissioner for Services and Enforcement, the IRS has a backlog of 11 million pieces of unopened mail that accumulated during the coronavirus shutdown – a backlog that is continuing to grow at an estimated one million new pieces of mail each week. This unopened mail includes any paper-filed income tax returns sent to the IRS in the last three months; amended tax returns; tax return payments; estimated tax payments; and taxpayer correspondence responding to notices, requesting adjustments or abatements of penalties, all of which translates to a significant wait for many taxpayers to receive refunds or resolutions to their tax issues.
IRS offices around the country have been closed since early April. Thousands of employees across several states have come back to work as of this week, however, the IRS does not anticipate returning to full operational status until mid-July.
Taxpayers who have filed paper tax returns are experiencing significant delays in both the processing of their returns and, more importantly, in receiving their tax refunds. Generally, refunds for paper filed returns are issued about six weeks after the IRS receives the return. This year, it may take the IRS up to three months to process the mountain of paper returns in the order they were received and issue refund checks. Although about 90% of taxpayers electronically file their tax returns, over 15 million individual taxpayers still file their tax returns by mail.
This is even worse for those who submitted amended returns by mail during the shutdown. For the last several years, the IRS has quoted sixteen weeks as the processing time for a basic (read: no complex issues of fact or law) amended return, and often exceeded that time frame. With the current backlog, it appears that the time frame for processing of amended returns will increase significantly.
Individuals who electronically filed their tax returns may also feel the impact of the shutdown. Without eyes to provide additional reviews or hands to mail out letters, many e-filers are also experiencing refund delays because their returns were flagged for missing information, or for additional review to prevent loss due to identity theft. With the rise in fraudulent returns filed over the last several years, the IRS has put in place many safeguards, including additional scrutiny of sizable refunds. Returns filed with large over-payments require additional approval before the IRS issues the refund or moves the over-payment to next year’s estimated taxes, but due to the pandemic, no one was working at the IRS to review and approve these refunds.
If you filed your income tax return, by mail or electronically, and are expecting a refund that you have yet to receive, the first step is to check the status of the refund online by visiting the IRS refunds webpage. If you filed an amended return, and have not received a refund or resolution, the status can be checked here. If the status shows that either return is processing, then the IRS has received the return, and it is likely a matter of IRS personnel working through the backlog. If the status shows an issue, shows a refund sent but you did not receive it, or shows the processing of an amended return that has extended beyond sixteen weeks, then active involvement by you or a tax practitioner is needed.
Aronson’s Tax Advisory team can assist in communicating directly with the IRS regarding missing information, identity verification, and even the abatement of certain penalties. If you have a return that has not processed, or another issue with the IRS that has been delayed due to the pandemic, our tax team at Aronson may be able to help. Please contact Patrick Deane or one of Aronson’s tax professionals at 240.364.2580.