The Internal Revenue Service is holding 29 million tax returns for manual processing, contributing to more refund delays than are typical in a normal filing season due to sweeping tax code changes, limited resources, outdated IT systems and a backlog of unprocessed 2019 paper tax returns, according to Erin Collins, the National Taxpayer Advocate.
“As one would expect, IRS employees are stretched thin working through the manual processing of these returns,” Collins said Wednesday. “So if a taxpayer’s return is pulled for manual processing, there will be delays.” Typically, the IRS sends most refunds within 21 days or less of taxpayers filing their return. But for some early filers, the wait for a tax refund has been six weeks to eight weeks already.
Of the nearly 30 million returns being held for manual processing, more than 8 million individual returns were in “suspense” status awaiting review and manual processing, as of the week ended April 9. Why? The $900 billion stimulus package signed into law in December, known as the Consolidated Appropriations Act of 2021, didn’t leave the agency enough time to prepare for some of the tax code changes before the delayed filing season began Feb. 12.
December’s stimulus legislation had included an “income look back” rule that allowed taxpayers to use their 2019 income to calculate their eligibility for the Earned Income Tax Credit or the Additional Child Tax Credit on their 2020 tax return. Both are refundable tax credits for low- to moderate-income working individuals and couples, particularly those with children.