2020 has been the year of remote work, and that extended to the IRS, as well. The agency closed its offices earlier in the year when the coronavirus outbreak began. But now, as 2020 winds to a close, the IRS still has a major backlog of mail on its hands, and that includes an estimated 1 million tax returns that it's yet to process.
The problem with paper tax returns
Many tax filers submit their returns electronically, but some opt to go old school and file paper returns, instead. In a normal year, that's not a huge problem, though it generally means having to wait about twice as long to get a refund (six weeks, versus three weeks for taxes filed electronically). But in 2020, it's a nightmare for both the people who are waiting for their returns to be processed and the IRS itself, which has an estimated 3 million pieces of unopened mail to grapple with.
The big problem in delaying tax return processing is that most filers are due a refund from the IRS each year, and there's no reason to think 2020 will be an exception. As such, many people are still awaiting refunds from returns submitted months ago. And while the IRS has pledged to pay interest on overdue tax refunds this year, that may not be enough to soften the blow of having to wait on that money during a pandemic.
Will a second stimulus package delay refund processing even further?
Lawmakers are still trying to come to terms on a coronavirus relief package to follow late March's CARES Act, which allowed for an initial round of $1,200 stimulus checks. It's too soon to know when a second stimulus deal will be signed and whether it will actually include a follow-up round of direct payments.
However, if a bill does go through that includes those checks, the IRS may need to shift focus to get that money out, thereby further delaying the processing of unopened returns and the issuing of refunds associated with them. That said, the IRS has a system set up to send out stimulus payments automatically, whereas paper returns have to be sorted manually, so there may not be a huge impact if a second stimulus round is approved.
A better way to file taxes
Most years, there won't be a pandemic and the IRS will be better equipped to process paper tax returns as they come in. But in future years, it pays to shift to electronic filings if you've never gone that route before. Not only are you less likely to make an error with an electronic return, but you also won't have to worry about your taxes getting lost in the mail. And the software you use might alert you to tax breaks or credits you otherwise wouldn't have thought to claim.
Meanwhile, if you're waiting on a refund from your 2019 paper tax return, there's probably not much you can do to move the process along. Though the IRS has an online tool for checking your refund status, that won't help if your taxes are still in a sealed envelope in an overloaded mailroom. The IRS has pledged to work through its backlog as quickly as possible -- but exactly what that means is yet to be determined.