For millions of American families, there's never been a more difficult time to make ends meet. Millions are out of work, and millions more are dealing with unprecedented challenges in juggling work and family commitments to try to keep making a living. Government moves such as stimulus checks and enhanced unemployment benefits are helping, but people need every penny they can get.

That's why many people are frustrated at the extra time they've had to wait to get their tax refunds from the Internal Revenue Service. Many people who filed paper tax returns might not see their refunds for months because the IRS hasn't been able to process paper returns due to coronavirus concerns, and there's no fixed date for the tax service to return to normal operations. Yet even among the roughly 90% of American households that filed their taxes electronically, there's been a noticeable uptick in refund delays -- delays that are coming at the worst possible time.

Below, we'll look at what might be going on with these e-filing refund problems.

A Treasury refund check on top of a Form 1040

Image source: Getty Images.

The benefits of electronic filing

For years, the IRS has encouraged taxpayers to file their taxes electronically. E-filing has a number of advantages that are beneficial both to the IRS in its processing of your return and to you in getting faster refunds. They include the following:

  • E-filing is more accurate, largely because the software most taxpayers use to help them file electronically corrects math errors. The filing process also catches other common mistakes that paper filers often make, such as leaving out vital information (like Social Security numbers) or failing to sign their returns.
  • E-filing is more secure than paper filing, as it doesn't rely on mail service and uses modern cybersecurity measures to protect your personal information.
  • E-filing is convenient, letting you send in your taxes with a single click rather than having to print out forms and potentially visit the post office to ensure correct postage and delivery.
  • Most e-filers get their refunds faster. There's no delay in waiting for paper returns to get delivered and processed, and if you use direct deposit, you can further speed up your refund.

The IRS boasts that the vast majority of taxpayers who file their taxes electronically get their refunds within 21 days. However, this year, many haven't -- and most of them aren't getting any explanation for what's going on.

What can delay refunds on e-filed returns?

Electronic filing avoids some common errors, but it isn't perfect. Even if you've e-filed your return, there are still situations in which the IRS acknowledges that your refund might get delayed. Unfortunately, some of them involve much more serious problems.

The worst-case scenario is when you've been the victim of identity theft. If someone else fraudulently filed a tax return before you did in an attempt to take your refund money, the IRS won't accept your later-filed return. You're supposed to find out about that immediately upon e-filing, as the electronic system should inform you that it has rejected your filing. However, many taxpayers aren't prepared to get this rejection notice and therefore mistakenly assume that the IRS has accepted their return.

The IRS also won't be able to process an electronically filed tax return if it's incomplete. In some cases, it's immediately obvious that your e-filed return doesn't have all of the information it needs, and the IRS can reject the e-filing right away. However, it sometimes takes more complete processing to discover that vital tax information isn't included with your return. In this case, you'll typically get a notice from the IRS asking for the missing information, but disruptions in IRS offices are slowing that process down this year.

Finally, you'll want to make sure that your bank account information was correct on your e-filing request. If you included direct deposit information but the numbers were incorrect, then after a few attempts, the IRS will eventually send a paper refund check. That can add a considerable amount of time to the timeline for getting your refund.

Few good options right now

The IRS offers its Where's My Refund tool for helping taxpayers track their refunds, but at some point, that tool instructs taxpayers who haven't gotten refunds to contact the IRS. Right now, it's extremely difficult to reach IRS personnel in person, and that's likely to remain the case as long as coronavirus lockdowns are in place.

At some point, IRS operations will return to normal, and the logjam of held-up refunds will finally start to break. But it's hard to complete your tax planning around when that'll happen, and for many Americans, the waiting will only make the damage to their personal finances that much worse.