We’re Still Facing Federal Tax Refund Delays

The Internal Revenue Service has a simple explanation for a terribly complicated situation. Why are some people waiting so long for tax refunds this year? The quick answer is COVID-19. Many people are facing wait times of 8 weeks and longer for refunds.  But when you consider the logistics involved, that might actually be showing how a massive government agency can still hold on to get things done facing lots of its own hurdles.

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At last report, the IRS figured it had approaching 20 million unprocessed returns in hand. And while it is processing refunds or issuing invoices for unpaid tax amounts, it is also in charge of handling a couple hundred million stimulus payments going out to people throughout America.  It’s no small task list.

The IRS was running at limited capacity through the height of the COVID-19 outbreak last year. It’s pretty much fully open and working at this point. But the impact of all those roadblocks last year lingers.

Along with the processing delays, the IRS has had a separate team working to identify people who now get “special” refunds based on unemployment benefits now rendered nontaxable.  The IRS media release on the subject states, “IRS efforts to correct unemployment compensation overpayments will help most affected taxpayers avoid filing an amended tax return. So far, the IRS has identified 13 million taxpayers that may be eligible for the adjustment. Some will receive refunds, which will be issued periodically, and some will have the overpayment applied to taxes due or other debts. For some, there will be no change. The American Rescue Plan Act of 2021 (ARPA) excluded up to $10,200 in unemployment compensation per taxpayer paid in 2020. The $10,200 is the maximum amount that can be excluded when calculating taxable income; it is not the amount of refunds."