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Tax refunds are being delayed as the IRS holds nearly 30 million tax returns for manual processing

"If a taxpayer's return is pulled for manual processing, there will be delays."

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If you feel like your 2020 tax refund is taking longer to arrive than usual, you're not alone, and you may well be right.

The IRS is holding 29 million tax returns for manual processing, meaning they'll require human review, according to the National Taxpayer Advocate, an independent arm of the tax agency that serves as a consumer watchdog. That backlog is delaying tax refunds for many Americans.

Typically, the IRS sends out refunds in 21 days or less to taxpayers who have filed electronically. This year, some people are reporting waits of six to eight weeks, the Detroit Free Press found.

The delays can be especially painful in a year when many people are counting on that tax refund to make ends meet. Nearly 3 in 4 people expecting a refund, or 73%, say those funds are important to their financial health, per a recent CreditCards.com survey. That includes 43% who classified their refund as "very important."

The average refund this year is $2,873, according to the latest IRS statistics.

Here are some of the reasons your tax refund may be slow to arrive and how you can troubleshoot a late payment.

Verifying credit eligibility slows processing times

This year, a number of factors are contributing to refund delays, says Melanie Lauridsen, a senior manager for tax policy and advocacy with the American Institute of Certified Public Accountants.

The IRS is still dealing with staffing issues as a result of the Covid-19 pandemic. And its employees have a lot to take care of: While tax season remains the agency's top priority, it has also been handling dispersion of the third round of stimulus checks, and is preparing to issue advance payments of the Child Tax Credit this summer.

Plus, "a lot of the relief measures that have been put into place are causing a lot of confusion," Lauridsen explains. In late March, the IRS warned taxpayers that processing time may be slowed in order to verify eligibility for credits including the Recovery Rebate Credit (RRC), the Earned Income Tax Credit (EITC), and the Additional Child Tax Credit (ACTC). As the Taxpayer Advocate Service and IRS have pointed out, elements of those credits may "require" a manual review of the return.

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"A human needs to come along, pick up these returns, and do a review," says Lauridsen.

As the IRS said in a news release, "This work does not require us to correspond with taxpayers but does require special handling by an IRS employee, so in these instances, it is taking the IRS more than 21 days to issue any related refund." 

The IRS had a backlog of 6.7 million returns before tax season started

On top of this tax season's challenges, the IRS is also dealing with a backlog of 2019 paper tax returns that it was unable to process after closing its offices during the height of the pandemic, according to the Taxpayer Advocate Service. As of January 29 — that is, about two weeks before this year's tax season opened Feb. 12 — the agency had yet to process 7.6 million prior-year returns, per Politico.

The current 29 million return backlog includes more than 8 million individual returns awaiting review and manual processing, the Taxpayer Advocate Service estimates, as well as 5.3 million individual paper returns from 2019 and 2020, 4.7 million individual returns "with processing errors or fraud identification issues," and 11 million business or other returns.

"As one would expect, IRS employees are stretched thin working through the manual processing of these returns, so if a taxpayer's return is pulled for manual processing, there will be delays," Erin Collins, the head of the Taxpayer Advocate Service said in a recent blog post.

A human needs to come along, pick up these returns, and do a review.
Melanie Lauridsen
Senior manager for tax policy and advocacy with the AICPA

What to do if your refund status is in 'suspense'

If your refund is delayed, experts say your first stop should be the IRS website — specifically, its "Where's My Refund?" feature. You can also download the IRS2Go app. Both tools let you check the status of your refund.

Unfortunately, there may not be much detail. The Taxpayer Advocate Service has chided the IRS for offering limited information. A return that is "being processed" could be caught up in the backlog. If yours is marked as in "suspense," that likely means it has been flagged for manual review.

"Currently, the vast majority of processing delays result from tax returns not loaded onto the IRS system or in 'suspense' status awaiting IRS action," the consumer advocate points out, adding that its ability to advocate for taxpayers experiencing such delays is limited.

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Calling the IRS is unlikely to help, either. As of April 17, IRS staffers have been able to answer just 2% of the 75 million taxpayer calls to the IRS's 1040 phone line, according to the Taxpayer Advocate Service.

"You are not going to get through or you are going to be on hold forever," Timothy Gagnon, an associate accounting professor at Northeastern University, recently told Grow. The agency is "getting thousands of calls. It's a hard time to get an answer."

IRS Commissioner Charles Rettig said in a hearing earlier this month that the IRS is on track to get through its backlog by the summer.

Your main recourse may be simply to wait and see what happens with your return, Lauridsen says, though she acknowledges "it's really painful to say it."

"A lot of the taxpayers are just unaware of the fact of all the troubles of the IRS is having," she says, "and it really comes down to trying to have some patience."

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