If you haven't gotten your 2020 tax refund, you are in good company.
At the end of the 2021 filing season in May, the IRS had a backlog of 35 million tax returns that still needed to be manually processed, according to a report released Wednesday by the National Taxpayer Advocate, a government watchdog.
The backlog includes about 16.8 million paper tax returns, some 15.8 million returns suspended for further review and 2.7 million amended returns. The backlog is nearly three times larger than it was in 2020, and a fourfold increase from 2019.
The coronavirus pandemic and a shutdown to curb the spread of the disease is mostly to blame for the pileup, according to the report. Still, long wait times for refunds may be particularly harmful this year, especially for low-income Americans eligible for certain credits or those still waiting on stimulus checks.
"For taxpayers who can afford to wait, the best advice is to be patient and give the IRS time to work through its processing backlog," wrote Erin Collins, the National Taxpayer Advocate, in her report to Congress. "But particularly for low-income taxpayers and small businesses operating on the margin, refund delays can impose significant financial hardships."
An overwhelmed IRS
The 2021 tax filing season started late and was extended an extra month due to the coronavirus pandemic.
To make matters worse, the agency was inundated with phone calls and unable to keep up. During the 2021 filing period, the IRS received 167 million phone calls, four times more than during the 2019 season. As a result, only 9% of calls were answered by a live customer service representative.
The popular "1040" line, the most frequently dialed IRS toll-free number, received 85 million calls during the 2021 filing season, with only 3% of callers reaching a live person.
Overall, the IRS processed most tax returns in a timely fashion in 2021, according to the report. In the last decade, funding to the agency has fallen by about 20%, leaving it less equipped to deal with the coronavirus pandemic.
In addition, the report only includes data through the end of the 2021 filing season, which ended May 17, meaning the IRS may have worked through more of the logjam since then.
In a June hearing with the Senate finance committee, IRS commissioner Chuck Rettig said that as of May 28, the IRS had processed more than 137 million individual income tax returns and issued more than 101.2 million refunds totaling $281.4 billion. About 70% of taxpayers got money back in 2021, with an average refund of about $2,800.
The IRS has also issued about 475 million economic impact payments totaling $807 billion in three separate rounds over the last 15 months. The agency also was tasked with managing monthly advanced child tax credit payments starting July 15.
More funding on the horizon
Going forward, the agency may gain more responsibilities from Congress, including further child benefits, energy credits and more.
President Biden is also pushing for additional IRS funding to deal with the growing tax gap, and specifically to crack down on the wealthy that skirt taxes. The latest bipartisan infrastructure deal included more money for the IRS for this purpose.
While the challenges faced by the IRS over the last year are understandable due to the pandemic, long wait times for refunds can be devastating for Americans, according to Collins.
"Taxpayers cannot experience similar challenges in future filing seasons," Collins wrote in the report. "We cannot allow the agency to face the staffing and technology limitations it has experienced this past year."
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