Americans are struggling through tough times. Tens of millions of people are out of work and counting on getting money from whatever sources they can. Between expanded unemployment benefits, $1,200 stimulus checks, and other assistance programs, most people simply can't afford to wait for cash that's coming to them.
Around this time each year, many taxpayers hope to get their tax refunds back from the Internal Revenue Service in a timely manner. The fact that this year's tax deadline got pushed back to July 15 has led to some people putting off filing their returns, even though it means that they won't get their refunds until later. Yet many of those who have filed haven't gotten tax refunds yet, and because of the reason behind the delay, they're likely to have to wait quite a while. The cause hasn't gotten a lot of publicity, but it affects millions of people -- and could be the reason you're still waiting for your money back from the IRS.
Hidden in the details
The IRS routinely tells taxpayers that it prefers to receive tax returns through electronic filing. Adoption of e-filing has been quite high in recent years, with about seven out of every eight tax returns in 2019 getting electronically transmitted to the IRS.
That's why an April 9 release from the IRS didn't seem like anything out of the ordinary. It began as many similar messages have in the past, telling taxpayers and tax professionals to use electronic options where possible. In addition to the usual explanations of speeding up process of tax returns and refund payments, the IRS also noted that e-filing supports efforts toward social distancing during the coronavirus pandemic.
Nowhere in the April 9 release did the IRS say anything about not sending refunds out to taxpayers. Instead, you have to read between the lines to understand the current situation.
Paper return processing is on hold
Four paragraphs down, you'll find the key language in the IRS release:
The IRS is not currently able to process individual paper tax returns. If you already have filed via paper but it has not yet been processed, do not file a second tax return or write to the IRS to inquire about the status of your return or your economic impact payment. Paper returns will be processed once processing centers are able to reopen.
Even here, the IRS doesn't connect the dots and explicitly say anything about refund checks. However, once you think about it, the message is obvious: If the IRS can't process paper tax returns, then it can't process the refunds that those paper tax returns contain.
What you can do if you haven't filed yet
For those taxpayers who've already filed paper returns and are hoping for refunds, there's little you can do. The IRS explicitly says not to file a second return, as it could cause problems down the road once your paper return does get processed.
However, if you haven't yet filed your tax return and you need that refund quickly, electronic filing is your only reasonable option. The IRS isn't offering any guidance on when you can expect paper tax return processing to resume, and it's clear that the doing so isn't a high priority for the tax service. E-filing takes you out of that uncertain situation and should help speed up your refund.
Electronic filing is also important if you're counting on getting a stimulus check based on your 2019 income. If you use a paper return and it doesn't get processed in timely fashion, then you might not get a check at all -- and if your 2020 taxes take you over key income thresholds, you might not ever get the benefit of the stimulus payments.
Many people find electronic filing inconvenient, costly, or just not as desirable as filing a paper return. But if you're counting on getting money from the IRS, there's simply no alternative this year. It's unfortunate that the IRS wasn't able to get that message out more effectively before it was too late for millions of paper return-filing taxpayers.