While taxpayers can start filing their income tax returns by January 24th, existing backlogs and longstanding operational problems at the IRS—aggravated by the coronavirus pandemic—are likely to make for a frustrating filing season for taxpayers and tax preparers, a Treasury Department official said Monday.
The IRS is still dealing with backups in processing returns from the past two filing seasons. While tax collectors typically has about about 1 million pieces of unopened mail—including tax returns—in their backlog when starting a new filing season, there are at least 6 million unprocessed individual returns as of December 23rd. This is the most recent date for which data is available on the agency’s website.
Disruptions from the ongoing pandemic have been made worse by years of budget cuts, a shrinking workforce, and outdated technologies at the IRS.
More than 150 million individual income tax returns typically roll in over the course of a few months.
Tax returns for 2021 are due April 18 for most individual filers, a few days after the normal April 15 deadline due to a holiday in Washington, D.C. However, extensions can be requested.
There have not been any discussions about delaying the deadline beyond this April, the Treasury official said. However, it is important to remember that it has still happened over the last two years, where the due dates were reset to May 17, 2021, and July 15, 2020 respectively.
To improve odds of faster tax return and refund processing, taxpayers should take steps such as filing electronically and providing direct deposit information rather than requesting paper checks for a return, the official said.
Though most taxpayers file electronically, around 10 percent of total tax returns still get sent to the IRS on paper, and a good chunk of those paper returns remain unprocessed as they are caught up in a mail backlog that has developed early in the pandemic. For millions, that means delayed refunds, and incorrect penalties and assessments by the IRS because agency employees have yet to process all of the mail that has poured in.
Extra attention is warranted this year due to economic stimulus checks previously sent out by the IRS and advance Child Tax Credit payments, which more than 30 million households received monthly from July through December. They can claim an extra six months’ worth of the credits when they file their returns.
The IRS is sending taxpayers separate letters on stimulus and child credit payments they received to help them accurately record the information on their upcoming returns.
The IRS could get more individual income tax returns than normal this year because the stimulus and child credit payments may trigger tax returns from people who typically earn too little to file. Still, that extra workload should not affect IRS processing, the Treasury official said.
The agency should be able to process most refunds within three weeks, which is its normal turnaround time, the Treasury official said.