[Note: This story originally ran on the Swell Investing blog back in March 2019. The site is shutting down and, hey, this is good stuff.]
The bad news? The Internal Revenue Service is already lagging behind in processing refunds, mainly due to the last shutdown, which was the longest in U.S. history.
Despite calling back furloughed IRS workers in mid-January for tax filing season, the IRS has processed 26 percent fewer returns compared to the same time last year, according to data released by the agency earlier this month.
One reason for the drop is that fewer returns have been filed. Another is that the IRS is dealing with what might be the worst case of “vacation email pileup” ever. More than 5 million pieces of mail went unanswered and 87,000 amended returns did not get processed during the 35-day partial shutdown, according to (of course) an audit conducted by the office of the National Taxpayer Advocate.
In other words, there’s a backlog. A big one.
So much for the IRS’ contingency plan.
That might not be the only reason your refund is late. Remember the Tax Cuts and Jobs Act a.k.a. the President’s $1.5 trillion overhauls of the tax code? Welp, the new tax law has left many wondering how to file their taxes and what they should claim, from itemizing deductions versus taking a standard deduction (now doubled from previous levels). Not to mention trying to make sense of all the new rules for personal exemptions, earned income, mortgage interests, and other tax credits.
All these changes have left both the IRS and tax-prep companies scrambling to upgrade their software. Most of the major changes have been completed, but firms are still waiting on both the IRS and state agencies to complete work on their end, writes Forbes personal finance columnist Robert Farrington:
“According to a recent conversation I had with the CEO of a major tax firm, ‘[the] IRS has left us with a bunch of loose ends and forms that have still not been finalized. We try to be really conservative with draft forms, and if we’re not 100% positive how they will turn out in final form, we lock people out until the finals have been published. We’re also still waiting to go live with a handful of states.’
Speaking of forms, good luck with those new “postcard-sized” 1040sreleased in December. The form omits several popular deductions, including those for student loan interest and teaching supplies. You’ll need more forms for those.
And don’t expect to call the IRS for help, either. According to the audit, the agency is picking up its accounts management line about 48 percent of the time this year, down from 90 last year. Hold times have more than quadrupled, up to 17 minutes from four last year.
Those calling to make payment arrangements, if they got through, waited an average 81 minutes to speak to an agent.
So what’s the best move for tax filers? Get ’em in early, writes Farrington. The IRS still expects the earliest refunds to reach taxpayers (either by check or direct deposit) starting February 27, though those who claimed an earned income or additional child tax credit may experience a wait. And the agency still claims to issue “[nine] out of 10 refunds in less than 21 days.”
FYI: They’ve been using that language since 2016.
If you’re still waiting three weeks after you filed electronically or six by paper, contact the IRS. Just be sure to block out the rest of the afternoon.