If you’ve been waiting for your federal tax refund, don’t hold your breath. Tax return processing backlogs are at historic highs. Between the COVID-19 pandemic, multiple tax law changes, and outdated systems, the IRS is overburdened and under-resourced. Additional funding for IRS staffing and infrastructure proposed in early versions of the Build Back Better infrastructure bill was stripped out during Congressional negotiations. As of now, it doesn’t look like additional IRS funding will re-appear in the final bill, assuming there is one.
Over the summer, the IRS reported a backlog of 35 million unprocessed 2020 individual income tax returns. That’s a 500% increase over pre-pandemic times, just for initial return filings. Last month, the IRS had a backlog of over 2.7 million unprocessed amended returns. Business and employment return processing is significantly backlogged, too.
The IRS’ website explains some of the reasons why a tax return might take longer to process than others, including corrections to the Recovery Rebate Credit, the Earned Income Tax Credit or an Additional Child Tax Credit using 2019 income, and the need for general review. These issues require manual review by an IRS representative. Staffing issues prolong the backlog for manual reviews.
So, what can you do if your tax refund hasn’t arrived after weeks of waiting? Unfortunately, not much. Calling the IRS is not practical – there are long waiting times on hold and the agents can’t see information in their systems if the return is not processed. Individual taxpayers are directed to check the refund status from original returns at https://www.irs.gov/refunds. For amended individual returns, the link is https://www.irs.gov/filing/wheres-my-amended-return. Businesses need to check their online account for information. More details and contacts are at https://www.irs.gov/businesses.
Income tax return processing at the IRS is backlogged like it’s never been before. If your return included the Recovery Rebate Credit, other tax credits, or just needed a manual review, your patience is being sorely tested right now. Unfortunately, all you can do is check the IRS website periodically to get a status update. Don’t even think about calling the IRS to find out what’s going on. After waiting on hold for up to an hour, the agent who answers probably can’t assist you because unprocessed returns aren’t visible in their system.
It’s a frustrating but understandable situation, given that the IRS is overburdened and under-resourced. Unless the IRS gets more funding for staffing and systems, conditions cannot improve any time soon. The need for taxpayers to be patient will be necessary for quite some time to come.