personal finance

Your Tax Refund Might Be Delayed This Year, the IRS Warns

10'000 Hours

When the Internal Revenue Service announced the opening of tax filing season on Jan. 24, it came with a warning: File early, because the agency expects delays processing returns and sending refunds this year.

"In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs," IRS Commissioner Chuck Rettig said in a statement. "IRS employees want to do more, and we will continue in 2022 to do everything possible with the resources available to us."

The IRS says most refunds are issued within 21 days of the return being filed. But this year it could take longer than that, for a few reasons. To start, the agency still had 6 million unprocessed individual 2020 returns as of December 23, 2021, comprised mainly of those with errors made by the taxpayer and those with Recovery Rebate Credit amounts being corrected by the IRS. That's millions more than the typical yearly backlog.

The agency also recorded over 2 million amended returns as of Jan. 1, 2022, and is still processing some corrections for people who paid too much in unemployment insurance taxes in 2020.

Additionally, the agency remains short-staffed, and that staff is dealing with Covid-related tax changes like the third economic impact payments and child tax credit payments. All of that takes time to verify.

The quickest way to get a refund is to file online early — again, taxpayers can submit their federal returns starting Jan. 24 — and request direct deposit. The agency says that it processes returns on a first-come, first-served basis.

A challenging time

Tens of millions of taxpayers experienced prolonged delays in the processing of their returns last year, as the IRS continued to work through challenges exacerbated by the Covid-19 pandemic, like staffing shortages and tax law changes. Erin Collins, the national taxpayer advocate, called calendar year 2021 "the most challenging year taxpayers and tax professionals have ever experienced."

One of the most common hiccups during processing last year was taxpayers claiming the Recovery Rebate Credit in order to receive their stimulus money. Even if taxpayers e-file, these errors need to be manually reviewed by an IRS employee.

Collins expects similar issues this year, with the third stimulus payment and enhanced child tax credits to take into account.

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