Overtaxed IRS warns of long delays for millions of tax refunds
This year, 29 million households can expect a delay in receiving their tax refund, according to the Taxpayer Advocate Service.
The tax agency’s independent arm says millions of tax returns have been held for manual processing, leading to long delays with no information for taxpayers on what’s causing the holdup or when they can expect their refund.
Usually, you’d get your payment within three weeks of filing your taxes, but the IRS is still working through a backlog of 2.4 million individual returns from 2019 and managing other challenges like sending out stimulus money.
That means if you’re counting on your refund to cover urgent expenses and pay down debt, you may be waiting a while.
Who should be prepared to wait?
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As of April 23, more than 116 million households had filed their taxes. The IRS is doing its best to keep up, having processed more than 105 million already, but more returns require additional review this year.
That includes returns that need corrections based on how much you’re owed in stimulus “plus-up” payments or to verify income for certain tax credits.
You may face additional delays if you’ve made an error in calculating how much you’re due back for the recovery rebate credit or your return has other errors. The IRS will get in touch by mail if it needs more information to finalize your return.
Can I do anything to speed this up?
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There are a few situations converging that have caused these delays. First, the IRS has not yet fully recovered from the initial impacts of the pandemic, as a recent report from the Treasury Department’s Inspector General for Tax Administration shows.
The tax agency’s ability to respond to calls to its call center has been hampered, with callers experiencing average waits of 18 minutes, compared to 11 minutes before the pandemic.
Going online for help isn’t going to be quicker, either. By the end of April, the IRS website had already recorded more than 1.2 million site visits — a 35.5% increase over last year.
With all that factored in, if you need your refund (including any extra stimulus money) right away, your best hope is to ensure there are no errors or incomplete details in your tax return before you hit “submit.”
What if I need an extension beyond May 17?
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While anyone can request an extension, some filers get an automatic extension from the IRS, including:
Disaster victims: Residents of Texas, Oklahoma and Louisiana who were impacted by the February winter storms automatically have until June 15 to file their taxes. They’ll also get more time to make contributions to their IRAs.
Combat zone taxpayers: Members of the military and eligible support personnel serving in combat zones are entitled to at least 180 days after leaving the zone to file their tax returns and pay any taxes they owe. The IRS provides a list of eligible zones on its website.
Taxpayers outside of the U.S.: U.S. citizens and resident aliens who live and work outside of the country and Puerto Rico automatically have until June 15 to file their 2020 returns and pay their taxes. This also applies to members of the military on duty internationally who don’t qualify for the combat zone extension.
If you’re not one of those exempted, all you have to do to get more time is submit a request for an automatic extension which would give you until Oct. 15 to file your taxes.
According to IRS estimates, more than 16 million taxpayers will take them up on an extension this year.
But, if you owe money this time around, it’s important to note that your payment is still due by the May 17 deadline. Missing the deadline means you’ll owe interest on any late payments — at a rate of 3% per year, compounded daily.
What to do if you needed your refund yesterday
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About 76% of Americans receive a tax refund with the typical payment amounting to $3,660, according to a new study from LendingTree.
Facing a long wait for your payment can be a huge hardship if you’re counting on those funds. But you have a few options to free up a little more cash in your budget.
Slash your insurance bills. With so many drivers using their cars less frequently during COVID, some auto insurance companies are offering discounts. Not yours? Sounds like it’s time to find a policy at a better price. While you’re at it, you also could save hundreds on homeowners insurance by shopping around for a lower rate.
Refinance at a better rate. Have you looked into refinancing your home loan in the last year? You could be missing out on some truly game-changing savings. An estimated 13 million homeowners have the potential to save an average $283 a month with a refi, according to mortgage and data technology provider Black Knight.
Get your coins working for you. Generating extra income in the stock market can be affordable and beginner friendly. One popular app helps you invest your “spare change” and build a diversified portfolio.
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