IRS: Tax Refund Delay Possible for Tax Returns Filed by Paper Forms

If you're like most Americans, you get a tax refund from the IRS every year. For around 75% of all Americans, that IRS refund check is often the biggest they see each year. The IRS says tax refunds this year may again be very late.

In their annual report to Congress, the National Taxpayer Advocate office described issues the IRS had processing tax returns last year. The report also warned that processing and refund delays could also plague this year's tax season, which begins Jan. 24.

"2021 was surely the most challenging year taxpayers and tax professionals have ever experienced," National Taxpayer Advocate Erin M. Collins wrote in the report. "The IRS is in crisis and needs to apply resources to its core mission – processing these returns and paying the corresponding refunds."

The report states that as of mid-December the IRS still had 6.2 million unprocessed individual tax returns and 2.8 million unprocessed business tax returns. These numbers don't include the nearly 3 million amended returns for both individuals and corporations. The report also stated it had nearly 5 million pieces of taxpayer correspondence to go through.

Why the Tax Return Delay?

The IRS tax return backlog started in March 2020 when IRS offices to shut down for health and safety related concerns as the pandemic started. The IRS says many of the backlogged tax returns are related to people who filed their 2020 tax return by paper forms. According to CBS News, returns filed by paper were put into storage trailers until IRS employees were able to return to work to access them.

While paper forms make up the bulk of the backlog, there are still many taxpayers waiting for resolution of the tax returns they filed electronically in 2020. Changes to rules around the Earned Income Tax Credit and new Child Tax Credit have contributed to these delays.

But the pandemic isn't the only reason for tax return delays. The IRS budget was reduced by about 20% between 2010 and 2021. As a result, the IRS lost about 33,000 full-time employees. Since the COVID pandemic began, the IRS lost even more employees. These staffing shortages are listed as the second of 10 "most serious problems" in the report.

How to Get My Tax Refund on Time in 2022

To avoid a tax refund delay, the IRS encourages all Americans to file their 2021 tax returns online and as soon as possible. According to the IRS frequently asked questions, if your tax return is correct and has no issues, your refund should be issued in about 21 days if you file your return electronically and choose direct deposit. 

The recently passed economic stimulus package brought changes to the Earned Income Tax Credit and Additional Child Tax Credit which allows taxpayers to claim credits based on 2019 income levels instead of 2020. If you're taking advantage of the stimulus package provisions, the IRS says your tax refund will likely take longer than 21 days.

What Do You Need To File Your Taxes?

To avoid a tax return or tax refund delay, start gathering your information now. Some employers offer online retrieval of tax-related information. If you're not familiar with what you'll need, look at your previous tax return as a guide. 

The most common forms taxpayers will need:

  • W-2s Forms employers

  • 1099 Forms if you are self-employed or an independent contractor

  • 1099-G Form if you had unemployment benefits in 2021 (Sent from unemployment department)

  • Form 6419 if you received the child tax credit (Sent from the IRS)

  • Form 6475 if you received a stimulus check in 2021 (Sent from the IRS)

  • 1098 Forms from banks and schools if you paid mortgage or school loan interest

File Your Taxes Electronically 

The IRS Free File program opened Friday, Jan. 14. This program allows taxpayers to file their 2021 tax returns online for free if they made $73,000 or less in 2021 (Adjusted Gross Income). The guided preparation does all the computations when you answer simple questions. 

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