Earlier this year, when the coronavirus pandemic hit, many employees were sent off to work remotely -- and that included IRS agents who were told not to report to their offices. But that's created a backlog that could be hurting taxpayers in a very big way.
The IRS is really behind on processing paper returns
Tax-filers have the option to submit their returns electronically or do so on paper. But those who went the latter route this year may be in for an unpleasant surprise. Because the IRS has been so short-staffed due to the pandemic, it's estimated that the agency has yet to look at 2.5 million hard copy tax returns for 2019, which means many filers could end up waiting a long time to receive their refunds.
Electronically filed tax returns don't need to be manually processed, but paper returns do. As such, those who submitted an electronic tax return this year may have gotten their refund in a timely manner afterward, while those who filed on paper could be left waiting for months. Now the good news is that the IRS is prepared to pay interest on overdue refunds; but that doesn't mean Americans don't want their money as soon as possible.
Making matters worse is the fact that the IRS extended this year's tax-filing deadline from April 15 to July 15, thereby giving Americans an extra three months to get their returns in order. Those who filed on paper but also took advantage of that delayed deadline could really end up waiting a long time for a refund. This especially holds true if a second round of stimulus payments is approved to go out to the public, because that will no doubt divert at least some IRS resources.
Of course, of the 2.5 million 2019 returns that have yet to be processed, we don't know how many are actually due a refund. But since the majority of those who file taxes each year get money back from the IRS, it's fair to say that many people are still waiting on money.
Be smart about how you file taxes
All of this makes a strong case for filing taxes electronically. While the 2020 tax season has clearly been unique in that it happened in the midst of a pandemic, the reality is that tax refunds are processed much more quickly for electronic returns than paper returns -- three weeks, as opposed to six weeks or longer. Filing taxes electronically also reduces the likelihood of making an error, and that's important, because returns with incorrect information could get held up or rejected, thereby delaying refunds further.
It's too soon to say when the IRS might catch up on its existing backlog. The agency has pledged to process all pending returns and refunds as quickly as possible, but that won't necessarily help those filers who need their money immediately. Between delayed refunds and the absence of a second stimulus payment, struggling Americans may really be feeling the strain right now, and unfortunately, the only thing a lot of people can do is sit back and wait for their money.