Tax Refunds and Stimulus Checks Still Delayed

Once again, taxpayers are waiting and waiting for their refunds. Unfortunately, this has been a common theme this filing season.

In 2020, the IRS flagged 5.2 million tax refunds for fraud, nearly a 50% increase over 2019. Of those returns, about 1.9 million were flagged for identity screening. The rest were earmarked for income verification.

Basically, the IRS wanted to ensure a crook wasn’t using a taxpayer’s identity to claim a tax refund. The agency mails letters, either a 5071C or 6331C letter, to taxpayers if it suspects foul play. The IRS can’t process a tax return or issue a refund until the person responds. However, most flagged returns aren’t fraudulent. In 2019, 63% of the refunds vetted for identity theft turned out to be legitimate.

While the IRS ultimately issues the money, with interest, taxpayers sometime wait months waiting for their refunds to arrive. One client waited 15 months for his refund. About 18% of refunds flagged for identity verification took more than 180 days to arrive.

Refund delays were among the top 10 most serious taxpayer problems in 2020 and it continues today. Unfortunately, it’s a pretty lengthy, drawn-out process and it doesn’t help that the IRS doesn’t have a streamlined process to handle this. Delays were exacerbated by the Covid pandemic since the IRS had to temporarily suspend some of its in-person operations, cut staff, rely on out of date technology and close processing centers. The IRS is using 2020 tax returns to determine eligibility for pandemic stimulus checks and advanced payments of the child tax credit. The agency uses information, such as annual income on a 2019 return if a 2020 return hasn’t been processed. But that may lead to reduced payments, or no payments, depending on a taxpayer’s situation.

The IRS has implemented an option for identity verification on their website. The taxpayer must first go through an authentication process called “Secure Access.” Unfortunately, there is not much luck with this systems and less than half of the taxpayers who tried succeeded in verifying their identity through this site in 2020. Such taxpayers must then interface with an IRS agent, over the phone or at a field office, for a resolution and to make matters worse the IRS doesn’t have enough staff to manage the volume efficiently. Often the taxpayer receives a response indicating, “due to overwhelming call volume, please call back at a later time or day." The best we can offer is assistance and patience in this process which requires a manual fix by the IRS. The good news is, taxpayers will get their refunds it will just take some time. So the old saying remains today, good things come to those who wait."