Certain items are beginning to look like lousy bets this spring, placing a wager on Gonzaga University or the University of Kentucky reaching the NCAA men’s basketball tournament’s Final Four.
I was under the impression that Tom Brady would genuinely retire from football. Imagine that no one would remember the Oscars in 2022.
Add another: Betting on receiving your federal income tax return in 21 days.
Many people, plain and simple, should not count on receiving refund money fast, as the Internal Revenue Service reminds taxpayers once again not to rely on “receiving a return by a specific date, particularly when making significant purchases or paying payments.”
The IRS has compiled a list of reasons why refunds may take months to process, even if you file online, including instances of identity theft.
Approximately 51.8 million taxpayers have already received tax refunds this year, as of March 18. It is an increase of 4.1 percent.
So far, the average return has been $3,305 – up 12.9 percent from the same period last year. Since the tax filing season on January 24, $171 billion in refund money has been distributed.
Numerous tax experts and first-time filers inform me that they received their federal income tax refunds within two weeks of electronically filing. That is some encouraging news.
Of course, the IRS found itself in a wild tangle last year with refund delays – a dilemma has continued to hinder returns.
As of early February, the IRS had a backlog of over 17 million processing tax returns from last year – including 10.8 million unprocessed individual returns, according to testimony before the Senate Finance Committee by Erin Collins, the national taxpayer advocate.
This statistic includes paper returns and some electronically submitted returns that were halted during processing, frequently owing to return errors.
Collins told the Free Press that millions of taxpayers might endure significant delays this year due to the IRS’s inventory backlog being pushed over into 2022.
The backlog is extensive and comprises initial returns, modified returns, individual business returns, and communication.
“They’re still processing those returns before they begin addressing some of the concerns and issues raised by this (season’s) tax return,” Collins explained.
Collins stated that 77 percent of all individual returns handled last year resulted in refunds.
According to her, processing delays often result in refund delays, resulting in financial difficulty for some, including evictions, electricity shutoffs, and an inability to purchase basics such as groceries and medicine.
What types of errors are committed when it comes to stimulus payments?
One potential source of contention: Did you disregard that you got any money last year? Or did you miscalculate the amount of money you received? And now, on a 2022 return, you’re claiming the recovery rebate credit?
Or are you underreporting the amount of money you got in 2021 for advance child tax credit payments?
The IRS continues to detect errors in claiming the recovery rebate credit and the child tax credit and warns taxpayers of potential delays. Some of these difficulties may take many weeks to address.
Someone may forget they got money last year and then attempt to claim the recovery rebate credit on their 2021 return.
One taxpayer informed me that he felt he was not paid his third Economic Impact Payment of $1,400 last year. He subsequently filed his return and claimed the recovery rebate credit, which the IRS accepted via electronic filing on February 23. He anticipated a $2,200 tax refund.
He checked his bank accounts again and discovered an auto deposit for $1,400 in early 2021.
Should he submit an amended return now, claiming a debt of $1,400, and then send the IRS a check? He couldn’t fathom that the IRS was merely reducing his refund from $2,200 to $800.
However, what if he delivered an updated return along with a cheque? What would happen if the IRS awarded the modified refund? How would he reclaim the $1,400?
This is not an unusual misunderstanding – one that, according to Mark Steber, chief tax officer at Jackson Hewitt Tax Service, may result in refund delays.
If this sort of error is made with stimulus payments or the recovery rebate credit, the taxpayer who is still entitled to a refund should take no immediate action.
“There will be no new tax return, no revised tax return, and no physical tax return submitted. The IRS is in charge of these, “As Steber stated.
Regrettably, we’re talking about a six- to 12-week wait for the IRS to correct this issue, Steber explained.
The IRS is not rejecting e-filed returns that contain the error; nevertheless, the agency notifies taxpayers of the inaccuracies. The IRS advises taxpayers not to submit an amended return in certain circumstances.
In an ideal world, taxpayers would have received — and retained — IRS Letter 6475, which stated the amount of the taxpayer’s third stimulus payment from March through December of last year.
While many individuals received their money in one lump amount in March, others may have received what was referred to as “plus up” installments.
According to their 2019 tax filings, some taxpayers received a lower sum in March or April last year. They got a “plus up” payment later that year due to submitting a 2020 income tax return.
They may have qualified for further stimulus funds, for instance, if their income fell during the 2020 recession and they qualified for additional funds based on their 2020 return.
Certain “plus-up” payments were sent to individuals who first received benefits based on information obtained from the Social Security Administration, the Railroad Retirement Board, or Veterans Affairs.
The IRS Letter 6475 provides a detailed accounting of the funds received for your stimulus payment or payments last year.
Collins stated that the IRS is rechecking the figures for anomalies related to the recovery refund to reconcile what you are claiming for the credit with what was paid out last year.
“And if it is inconsistent, the IRS will send a letter to the taxpayer requesting that they defend their figures or acknowledge that the IRS data may be right,” Collins explained.
“It will be long before those taxpayers receive their reimbursements,” she explained.
The tax return will be sent to the IRS’s error resolution system if the numbers do not match.
If the taxpayer still receives a refund after the IRS corrects the error, Steber explained, the IRS will revise the refund due and normally send the remainder as the new refund amount.
He stated that the funds would be received either direct deposit or paper check, as specified by the taxpayer initially. Additionally, the IRS will send the individual a letter outlining the change.
On the other hand, Steber explained that the situation gets more problematic if the taxpayer owes money. If the person owes a considerable amount of money, Steber said, it may be best to determine the amount owing, revise the return, and make a payment to the IRS before the April 18 deadline.
Are multiple refunds being processed more efficiently?
“The good news is that the IRS is not experiencing any extraordinary or unexpected challenges,” Collins stated. As of late March, a sizable number of individual taxpayers are filing online.”
Many refunds are being given, she added, presuming that an e-filed 1040 form is error-free.
However, everything is not well. Even with e-filed returns, trouble spots might occur when errors are made.
For instance, the IRS closed the filing season last year with a backlog of roughly 10 million returns placed on hold. The agency resolved inconsistencies between recovery rebate credits people believed they were entitled to and stimulus funds they got in 2020. Refunds on those returns were subject to delays.
Paper returns — particularly return requiring a paper check rather than a direct deposit — continue to have significantly lengthier processing times due to an outmoded system.
Collins, who talked with the Free Press via phone, advised that it might take six to nine months to receive a refund if you file on paper.
That is exactly what she stated — perhaps nine months. Much, she added, will rely on the IRS’s ability to clear a backlog.