Nearly 7 million tax returns haven't been processed by the IRS because of stimulus changes

• The IRS is behind in processing tax returns for nearly 7 million Americans.
• Changes in the December and March stimulus bills account for the delay, as does a cut in IRS staffing.
• Lawmakers have asked the IRS to extend deadlines and remove requirements on filing amended returns.
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President Joe Biden signed his $1.9 trillion stimulus package on Thursday, a win for many Americans who needed financial aid to recover from the pandemic. But that has slowed things down for the Internal Revenue Service to the extent that 7 million Americans are now waiting for tax refunds.

In December, Congress passed a $900 billion stimulus package that included $600 stimulus checks the IRS had to distribute. The more recent passage of the American Rescue Plan requires the agency to begin distributing $1,400 stimulus checks, and to field adjustments to unemployment benefits — a tax exemption on the first $10,200 of benefits — as well as a new child tax credit. 

According to IRS data, 6.7 million tax returns have not yet been processed in 2021, but in 2020, only around 2 million returns faced processing delays, reflecting the effects of the stimulus changes.

IRS spokesman Robert Marvin told The Washington Post on Friday that while most refunds take 21 days to be issued after filing season starts, some refunds may take longer.

“Many factors can affect the timing of your refund after we receive your return,” Marvin said. “Some tax returns take longer to process than others. For example, returns with an error, incomplete information or those affected by theft or fraud may take longer to process.”

In addition, the Government Accountability Office found in a March 1 report that from 2010 to 2019, IRS staffing was down by almost 23% and its budget was cut by 20%, factoring into the processing delays that must be resolved manually. 

“IRS’s overall 2020 performance was significantly impacted by its reliance on manual processes such as for paper returns, and its limited ability to process returns remotely while processing centers were closed,” the report said. “As a result, as of December 2020, IRS had a significant backlog of unprocessed returns and taxpayer correspondence.”

Democratic lawmakers have expressed concern with the backlog the IRS is experiencing, and the effects the backlog has on taxpayers who need their refunds to stay financially afloat. House Ways and Means Committee Chair Richard Neal and House Oversight Subcommittee Chair Bill Pascrell called for the IRS to extend tax filing season on March 8, citing the lack of help taxpayers were receiving from the agency.

More recently, 21 Democrats, led by Senate Majority Whip Dick Durbin, called on Friday for the IRS to remove the current requirement of an amended tax return for taxpayers who have already filed and want to account for tax relief in the stimulus bill.

“We recognize the challenges of implementing this change in tax law during filing season, particularly as millions of Americans have already filed their tax returns for 2020,” the letter said. “This underscores the need for Treasury and the IRS to take every action to ensure that all eligible individuals, including those who have already filed their 2020 tax return, are aware of and able to receive this critical relief.”

Biden’s stimulus plan included $1.9 billion in additional funding for the IRS, but the agency has yet to respond to lawmakers’ concerns on processing delays.

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