IRS building in Washington DC.
When the coronavirus shut down much of the United States, it included the Internal Revenue Service and it’s processing centers.
The IRS tax return processing centers, along with many other government offices, began closing in March. The IRS also pushed the 2019 federal tax filing deadline from April 15th to July 15th to give taxpayers more time to file and avoid paying potential fees and interest – but that didn’t stop many taxpayers from filing their returns.
If you expect to get a tax refund, there’s no reason to wait until July. You want to file as quickly as possible so you get your tax refund as quickly as possible. With unemployment so high, every little bit counts.
One of the most significant consequences of the temporary IRS closures was the suspension of processing paper tax returns and corresponding tax refunds. While the IRS tried to have as many workers telework, processing paper returns from home just isn’t feasible and a big security risk.
The public IRS watchdog, Taxpayer Advocate Service, analyzed the financial and mental impact of the pandemic-related closures in its Fiscal Year 2021 Objectives Report to Congress and estimated that there was a processing backlog of 4.7 million paper returns as of May 16th.
The report cites the other pandemic limitations such as the current IRS online self-help tools which were taxpayers’ only support resource after the phone and in-person support staff was sent home indefinitely. Both of these support options are now open with limited staffing.
While the various findings favor taxpayers, many with financial hardship are still wait to receive their refund. The anxiety continues to build as the CARES Act benefits like the $1,200 stimulus check is spent and the $600 weekly unemployment benefit boost expires July 31st.
The good news is that the IRS is processing paper tax returns again but there can still be a delay before you receive a refund.
IRS Core Operations Resumed on June 1
The IRS recalled “mission critical” employees across the nation to review paper correspondence starting June 1st. The earliest filers will see their returns and tax refunds process first.
Under normal circumstances, it takes the IRS up to six weeks to process paper tax returns. With the pandemic and the restart on June 1st, it may be six weeks from then before your return is processed. Unfortunately, they have not offered any guidance on when to expect it.
The IRS website currently states: “We continue to process electronic and paper tax returns, issue refunds, and accept payments. We’re experiencing delays in processing paper tax returns due to limited staffing. If you already filed a paper return, we will process it in the order we received it.
Do not file a second tax return or call the IRS.”
The IRS is processing tax returns in the order they receive them. Returns received first are processed first.
There are an estimated 10 million pieces of mail the IRS received during the closure. Approximately half of these pieces are paper tax returns. You can imagine how long it can take to process this much mail with a limited staff.
It appears that electronic returns are processing within the usual estimated 21-day window. Delays are possible if you need to submit additional documentation or make corrections.
Here’s what you should and shouldn’t do:
Only Call the IRS If You Need Help Filing a Return
The IRS explicitly states not to call them to verify your processing status. Calling the IRS won’t expedite the processing of your return. All returns process on a “first come, first serve basis.”
You can call the IRS if you need help filing your return or amending a return. The phone lines are open again but wait times are longer than usual due to limited staffing.
Some of the IRS Taxpayer Assistance Centers across the nation began phased reopening on June 29th. You can visit these centers to get in-person help with various services, including identity and document validation with filing your tax return. You will need to call 844-545-5460 to schedule an appointment.
Do Not File a Second Tax Return
Do not file a second tax return even if it has been several months since you mailed it in. The IRS most likely hasn’t lost your return. It’s more likely that your return is still in one of the IRS mail processing centers.
However, you should file a second return if the IRS returned your mailed return. The Taxpayer Advocate’s Objectives Report mentions that some paper returns were sent back. If your return was sent back to you, you can file another one. Consider filing online to avoid the backlog.
Use “Where’s My Refund?” To Track Your Refund Status
One of the most effective ways to see if the IRS has accepted your tax return is by using its “Where’s my refund?” tool. The platform updates daily and you can start checking at least four weeks after mailing your paper return.
You must provide these three pieces of information to track your refund status:
- Social Security Number or Individual Taxpayer Identification Number (ITIN)
- Filing status
- Refund amount
This tracking tool will update with each of the processing steps for your tax return. For instance, you can see if the IRS has accepted your return. Next, you may see the current estimated date the IRS will send your refund.
You might not have an estimated refund date if the IRS still needs to review your return. The Taxpayer Advocate Report observes, “Although the IRS is reopening some of its core operations, it is not clear when it can open and log all the returns sitting in mail facilities.”
Since they didn’t process any paper tax returns for almost two months, the IRS may not acknowledge receiving your mailed tax return yet. Their systems may need time to catch up.
If your return is still in the mailroom waiting to be opened and logged, the IRS tracking tool may not even know that they’ve received it because it hasn’t been processed.
Processing Errors Can Delay Receiving a Refund
Another reason you may still be waiting on your tax refund is if an IRS screening filter detects a potential reporting error. While each return passes through various automated filters, returns claiming a refund go through an extra layer of scrutiny.
The IRS uses screening filters to prevent tax fraud and find filing mistakes. Common reasons why your return may not receive immediate acceptance include:
- Mismatching Social Security Numbers
- Duplicate entries for pension or retirement plan distributions
- Wage verification for the Child Tax Credit or Earned Income Tax Credit claims
These filters first affected taxpayers who filed their return before the March closures and the IRS began sending notifications about filing errors. Some taxpayers received their notices but didn’t have time to make corrections before the IRS processing centers closed.
If 2020 were a normal year, the filer could correct those errors and receive their refund in a few short weeks. Instead, these returns are hanging in limbo as the IRS processing services temporarily stopped. Your revisions may be some of the first to process if you sent the additional documentation in close to the March shutdown.
The 2021 Objectives Reports from the Taxpayer Advocate finds that numerous reports were mistakenly flagged by the processing filters—a “false positive.” The IRS is now starting to resolve these errors and sending the correct refund amount plus interest from April 15th.
There are also over 20 million IRS notices about tax return discrepancies scheduled to be mailed during the two-month shutdown. The IRS is now sending this correspondence. You may also receive a notice stating the potential error impacting your tax refund.
It’s also possible to receive a notice if you owe the IRS money. For instance, your calculations may indicate you qualify for a refund or owe a smaller than expected tax penalty.
As many of these original notices include outdated response dates and deadlines, the IRS is printing inserts. The insert includes updated procedures of what you should do next so you can receive your refund (or settle a tax bill).
Your Tax Refund May Earn Interest
If you have already mailed a paper tax return, your only course of action is to wait for the IRS to process and accept your return. You will receive your refund electronically if your return includes your direct deposit information on the return. It may take a few extra days to receive your refund by mail as the IRS prints checks in batches.
Whether you file electronically or by mail, the IRS will pay you interest if you receive your tax refund after April 15th. While it doesn’t happen often, the IRS must pay you interest if you don’t receive your refund within 45 days of accepting your return.
The IRS is more lenient this year about who earns interest on their tax refund. As long as you file your federal tax return by July 15, 2020, you receive interest from April 15th until you receive your refund. This interest payment is one consolation if you have one of the 4.7 million paper returns waiting to be approved.
The average tax refund is $2,903 as of June 19th this tax season so you could be due a little bit extra in interest.
When Your Tax Refund Might Arrive
If you wait until the updated July 15th federal tax deadline to file electronically, you can expect to receive your refund within 21 days of the IRS accepting your return.
It’s pure speculation to guess how long it will take for the IRS to process the paper returns they receive in July. But, we can predict it will take longer than the usual four to six weeks the IRS estimates.
The IRS doesn’t publish a guaranteed tax refund schedule regarding how quickly you will receive a refund.
A basic rule of thumb is expecting the IRS to send an electronic refund between 10 and 15 days of accepting your return and up to 20 days for mailed refunds after accepting your return. You should need to use the “Where’s my refund?” tool for daily updates.
Fortunately, the IRS is open again and process paper returns and correcting filing mistakes. You must be patient if you mailed your return as those received in March are reviewed first. It may not be until the fall until you receive your refund if you mail a paper return this summer. Filing electronically is your best way to jump ahead in line if you still need to file your 2019 tax return.