When the U.S. tax filing season begins in two weeks, taxpayers should be prepared for delays as returns and refunds are processed, and for difficulties in reaching the IRS, Treasury officials warned on Monday.
Taxpayers and return preparers should gird for a challenging and frustrating tax season as many of the processing delays and customer-service shortages that have plagued the Internal Revenue Service for years will persist this year, Treasury officials told reporters. The officials said funding cuts and staffing shortages due to the ongoing health crisis are causing the problems.
“The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don’t face processing delays,” IRS Commissioner Chuck Rettig said in a statement Monday. “Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year.”
Returns can be filed as early as Jan. 24, with the tax filing deadline set at April 18 for most taxpayers because of a District of Columbia holiday on Friday, April 15, a Treasury official said. Taxpayers in Maine and Massachusetts have until April 19 to file and pay their liabilities thanks to the Patriots’ Day holiday in those states.
The filing season begins as the IRS is still grappling with several large administrative challenges that have been exacerbated by the pandemic, along with additional requirements — such as the processing of stimulus payments and advance child tax credits.
IRS representatives were only able to answer about 10% of phone calls to the agency last filing season, and as of mid-November, the agency still had a backlog of roughly 8.6 million returns to process. The IRS typically starts the filing season with a backlog of fewer than 1 million returns, an official said.
The IRS says it generally processes refunds within about three weeks of a tax return’s submission. The agency recommends filing electronically and requesting for the refund via direct deposit — rather than a mailed check —for a faster turnaround.
By law, the IRS must hold refunds until at least mid-February for taxpayers claiming the earned-income tax credit or the additional child tax credit that Congress enacted last year — so that the agency can conduct additional fraud checks.
Taxpayers who didn't receive some or all of their $1,400 stimulus payment from the March 2021 pandemic relief law can also claim that on their tax return this year.
The average tax refund in 2021 was $2,815, according to IRS data. Some taxpayers could find that their tax refund is smaller this year compared with previous years. In the March 2021 American Rescue Act, Democrats expanded the child tax credit for low- and middle-income households and sent half of the up to $3,600 payment in monthly installments. Those went out from July through December, essentially distributing a portion of the refund up front.
That shift to monthly payments — rather than the usual lump-sum distribution in the spring — was designed to help lower- and middle-income families better meet their regular living costs, especially amid the enduring pandemic. But the new method means some people won’t get the size of refunds that they’d otherwise expect — and could even have to pay the IRS back if their incomes end up being too high.
The expanded child tax credit expired in December. Negotiations to extend the monthly payments are stalled in the Senate as Democrats are deadlocked over how to advance President Joe Biden’s economic agenda. Without congressional action, families will no longer receive monthly payments and will instead be able to claim a tax credit worth up to $2,000 in spring of 2023 on their tax forms.
The Treasury officials said that it's critical for Congress to pass the Democrats’ social spending bill, which includes $80 billion for the IRS to bolster the agency’s enforcement efforts and its service operations.
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