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Taxes

Day 15 Of Tax Filing Season: 28 Million Tax Refunds, $3,021 On Average

Given the number of days the Internal Revenue Service has been open for processing 2020 tax returns, the number of returns taxpayers have filed is up 14% compared to last year. That’s the rosy way to look at the numbers. 

But consider this: Based on the calendar, as of February 26th, 2021 (Day 15) compared February 28th, 2020 (Day 33), the number of returns received is down almost 25%, with the number of returns processed down 31%. 

The IRS is making steady progress: As of February 26th, 45.3 million returns had been received, with 39.4 million processed. The IRS had issued 28.3 million refunds. The average refund was $3,021.

It’s a hard year to make comparisons because the tax filing season didn’t open until February 12 as the IRS was processing Round 2 stimulus payments. Typically filing season data catch up with prior year data as the filing season progresses. 

There are legitimate reasons to delay filing this year. As negotiations continue in Congress on the $1.9 trillion stimulus package, which includes Round 3 $1,400 payments, Senate Democrats have reportedly added a provision to make $10,200 of 2020 unemployment income taxfree. That would affect the tax return of anyone who got unemployment income last year. State law hiccups have caused some filers to delay too. Connecticut just passed a law sparing 110,000 Covid-19 telecommuters from double taxation. Here’s another one: If you’re one of 6.7 million taxpayers with a backlogged 2019 tax return in processing and asked for an overpayment to be applied to 2020 taxes, what’s the chance that that’s going to happen if the IRS hasn’t processed the return, asks enrolled agent Claudia Hill of Cupertino, California. The danger: the IRS might say there was an underpayment if the 2019 overpayment wasn’t credited to 2020.

When are taxes due? April 15. IRS Charles Rettig doesn’t seem to be budging on the due date, despite cries for an extension due to shortened filing season and complexities of coronavirus-related law changes.

Already filed and waiting for a refund? Information on the IRS Where’s my refund? web page may be delayed for some taxpayers. The Where’s My Refund tool may show “Return Received,” even if the IRS has already issued your refund, the IRS says. Whatever you do: Don’t call the IRS, the IRS begs. The tool is updated once a day.

The Government Accountability Office predicted a tough 2021 filing season in a recent report with alarming backlog statistics. As of January 2021, the IRS was facing 30 million unprocessed information returns—forms filled by third parties like a 1099 with information on taxable transactions. As of December 2020, written correspondence from taxpayers requiring the IRS to review and respond totaled 4 million pieces, up from 2.8 million in July 2020, the report said. And while all remaining mail from the 2020 filing season had been opened as of mid-December 2020, unopened mail for the 2021 season had already started piling up, to the tune of 700,000 pieces as of late January. The GAO identified another bug in the system that tax pros say is still a problem: In November, processing time for approving third-party authorizations was 25 days, significantly higher than the target goal of five business days for approval. 

The IRS’ reliance on manual processing of paper resulted in a significant backlog, delays for taxpayers and increased costs for the Treasury Department, the report says. The IRS paid about $3 billion in refund interest in fiscal year 2020, compared to $2 billion in fiscal year 2019. What’s to blame? Last year’s extended tax deadline of July 15, 2020, and the delay in processing business returns on paper (only 40% were e-filed). The GAO recommended, and the IRS agreed to conduct as assessment to identify barriers taxpayers face regarding e-filing business returns, and evaluate and implement actions to address those barriers as feasible. 

For anyone who can e-file, if you’re due a refund it will come faster that way, and know you’re doing a little bit to help the system.

Further Reading: 10 Tips For Filing Your 2020 Taxes

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