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"Extreme delays" for millions of taxpayers awaiting IRS refunds

Over a million Americans left out of stimulus
Over a million Americans left out of stimulus... 03:13

Millions of American taxpayers are still waiting for the IRS to process their federal income tax return — and waiting to receive their refunds, according to a new report from National Taxpayer Advocate Erin Collins. 

Collins said in a report to Congress the IRS had a backlog of 4.7 million returns for the 2019 tax year as of mid-May, which is delaying refunds for many. 

"Taxpayers who filed a 2019 paper return and are entitled to refunds may be in for a long wait," Collins cautioned in the report. 

This year's tax filing season has been tumultuous for both taxpayers and the IRS because of the coronavirus pandemic. While the filing deadline was pushed back from April 15 to July 15, taxpayers have had fewer IRS resources available this year because the agency shut down many of its help lines and centers. 

The lack of help for taxpayers was flagged by Collins, who noted that the "only resources readily available were IRS.gov and automated telephone lines." That proved frustrating to many taxpayers eager to determine when they'd receive their refund, she reported.

"While the overwhelming majority of taxpayers file electronically, taxpayers who file paper returns are experiencing extreme delays in processing their returns," the report noted. "Many taxpayers are facing financial hardship associated with the COVID-19 crisis and need the IRS to process their paper-filed returns as soon as possible and release their refunds."

The IRS did not immediately respond to a request for comment.

The other problem with the delays, Collins noted, is that it could affect a taxpayer's federal stimulus check. That's because the IRS is relying on either a taxpayer's 2019 or 2018 tax return to calculate their "economic impact payment," the official term for the payments. Halting the processing of 2019's tax returns "caused confusion for many taxpayers" in determining their eligibility for the payments, she noted.

Incorrect stimulus checks

Along those lines, "many individuals" have either not yet received a stimulus check to which they are entitled or have gotten a smaller payment than they should have received, Collins said. 

She didn't specify the number of taxpayers impacted by incorrect stimulus check amounts, but earlier this month the U.S. Government Accountability Office said that up to 450,000 individuals didn't receive $500 payments for children who qualified for the benefit.

Among the most common reasons for problems with stimulus checks are:

  • Taxpayers who received tax refund "anticipation loans" from tax preparers, which meant that the IRS might not have had their bank account information.
  • Stimulus payments that were deposited in the wrong bank accounts.
  • Individuals who didn't receive their $500 stimulus payments for children under 17.

Individuals will receive the adjustment on their stimulus checks next year, when they file their returns for the 2020 tax year. That's because the stimulus payments are effectively an advance on a 2020 tax credit, which means the IRS will check whether taxpayers got their full credit when they file their 2020 taxes.

That delay has come under fire from some lawmakers. "Struggling families in New Hampshire cannot wait until 2021 to receive the full stimulus payments to which they are entitled by law," New Hampshire lawmakers wrote in a letter to the IRS and Treasury last month. 

People excluded from first stimulus checks sp... 02:19

Collins, the taxpayer advocate, agreed with that assessment, pointing out that Americans are "likely experiencing financial distress now."

"The National Taxpayer Advocate recommends the IRS continue to work on solutions and alternatives to ensure that all individuals receive the EIP in its entirety in 2020 rather than having to wait until 2021 when they file their 2020 income tax returns," Collins wrote. 

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