The U.S. Tax season is almost upon us, and with it comes the perennial headaches and backlogs of IRS forms to file. While some taxpayers are able to avoid these challenges by paying via direct deposit or payment platform like Square, others will find themselves waiting in line at their local tax office as they wait for their refund check to arrive
Tax season starts in April of 2020, and the IRS will have to process millions of tax returns. There are many people who are still waiting for their refunds from last year.
WASHINGTON— The third tax-filing season since the coronavirus outbreak is about to begin, and taxpayers and tax preparers should expect additional delays, confusion, and irritation.
There will be some indications that business will continue as normal. For the first time since 2019, the individual tax deadline will be moved back to mid-April, and the Internal Revenue Service says it has been progressively lowering its backlog of 2020 returns and other pending material.
Despite this, the IRS is still dealing with backlogs from the tumultuous 2020 tax year, as well as additional issues like as the possibility of retroactive legislation and pandemic-era tax-law changes that may need special attention from taxpayers.
“The IRS is likely to have a bad start to the filing season,” said Erin Collins, the national taxpayer advocate who runs an IRS-run independent organization.
The IRS said in late December that it was on track to open its mail and that it had processed all returns received before to April 2021 that didn’t need special care or included problems.
However, as of Dec. 18, the IRS still had 6.3 million unprocessed individual returns and 2.3 million modified tax returns to process, while struggling with flat budgets prior to the epidemic. According to the IRS, amending returns might take more than 20 weeks instead of the typical 16 weeks. It has reduced the number of returns needing special treatment from 9.8 million in May to 42,000.
Anything that involves human eyes or hands at the IRS—paper returns, phone calls, and rectifying problems on returns—could still take a long time.
“I don’t even contact them anymore,” said Richard Pon, a San Francisco accountant who believes it is preferable to send letters and wait several months for a response than to charge customers while waiting on line for hours to talk with an IRS staffer.
As tax season approaches, Congress’s tax benefits designed to assist individuals deal with the pandemic’s interruptions will add to the workload. People who were qualified for the $1,400 economic stimulus payment in March but did not get it may claim it on their returns if they got early instalments of the child tax credit in 2021.
In late January, the IRS will mail notifications to taxpayers detailing the amount of stimulus and child-credit payments they got in 2021, according to official data. Mismatches between those numbers and the information on tax returns might cause processing delays as the IRS works to resolve inconsistencies or inaccuracies. According to Kathy Pickering, chief tax officer at H&R Block Inc.’s Tax Institute, this procedure might be especially difficult for families that have added children or seen major income fluctuations.
“Accuracy now has a value,” said Mark Steber, chief tax information officer at Jackson Hewitt Tax Service Inc., which produces nearly 2 million tax returns every year. “You’ll receive your money,” says the narrator. There’s no denying it. However, it might take a few more weeks or months.”
Taxpayers may prevent delays by filing online, utilizing direct deposit, and double-checking that their child-credit and stimulus numbers match the IRS mailings, according to Ms. Collins.
According to Douglas O’Donnell, the agency’s deputy commissioner for services and enforcement, employees at IRS paper processing facilities are still operating under pandemic constraints, making electronic filing more crucial.
“The epidemic has presented the IRS with unprecedented issues,” he added. “IRS personnel are working diligently to prepare for the forthcoming tax season as well as to resolve pending tax returns.”
Ms. Collins’ predecessor, Nina Olson, who left in 2019, suggested that the IRS devote some of its new employees—even higher-skilled auditors—to alleviate tax-filing bottlenecks.
“What they need to do is service the vast majority of taxpayers who are attempting to comply,” she said.
Ms. Collins is pushing the IRS to offer more frequent updates on its processing efforts, so that taxpayers who filed during a particular week may find out whether the IRS has begun processing that batch of returns without having to call.
Normally, Congress is hesitant to make changes to a previous year’s tax code after the filing season has begun.
PHOTO: REUTERS/ELIZABETH FRANTZ
And Congress may still make a retroactive revision to the 2021 tax legislation. Starting with the 2021 tax returns that taxpayers are about to file, the Democrats’ blocked $2 trillion education, health, and climate-change measure would raise the $10,000 ceiling on the state and local tax deduction to $80,000.
The IRS has yet to say when it will begin taking tax returns for the year 2021. Because of local holidays, the deadline for most individuals in Maine and Massachusetts will be April 18 and 19. The IRS has moved the deadlines for 2020 and 2021 to July 15 and May 17, respectively.
According to Henry Grzes, senior manager for tax practice and ethics at the AICPA, an accountants’ group, what formerly seemed like a season now seems year-round and tiresome due to changes in deadlines and legislation.
“On so many levels, we have to acknowledge that we’re in a world of unknowns,” he remarked. “All you have to do is roll with what you know and go ahead from there.”
Tax preparers recommend that clients file as soon as possible. Because the majority of individuals get refunds, filing early allows them to receive their money sooner. Filing a valid return may also assist prevent an identity thief from filing a fraudulent return using the taxpayer’s information.
“If you provide your tax preparer information earlier in the year, they will have more time to think about it and assist you,” Mr. Pon said.
The possibility of a larger tax relief for state and local taxes may cause some individuals to postpone filing their forms.
Given the administrative burden on individuals and the IRS, Congress is usually hesitant to amend a preceding year’s tax legislation after tax filing has begun. However, Congress reduced income taxes on unemployment benefits received in 2020 retroactively in March 2021, and the IRS awarded roughly 12 million refunds to persons who had previously filed and paid taxes on that income. That work is expected to continue until 2022, according to the EPA.
The same scenario might happen with the state and local tax deduction in the near future, with the IRS beginning to accept 2021 filings before Congress reaches a final decision on the tax code for 2021.
“On the one side, I think it’s fantastic that Congress is attempting to assist a large number of taxpayers,” Ms. Collins said. “Everything’s going to be a long process to put it in place.”
Richard Rubin can be reached at [email protected]
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Frequently Asked Questions
Will tax season be extended again in 2021?
Does the IRS still have a backlog?
Will the IRS extend tax season again?
A: Its very unlikely that the IRS would extend its tax season. Many people have already filed their taxes and the number of extensions has been limited, so it seems highly unlikely they will offer more than what is currently available.
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